If you are a small business owner, you may be expecting a tax refund this year for your company.  The good news is that in fiscal year 2017, Texas had the highest tax refund amount of all states with an average refund of $3,206.

If you are indeed receiving a tax refund, resist the urge to spend it all on impulsive purchases and instead invest it back into your small business instead.  Do remember that the refund is not a free giveaway from the government, but rather that money was yours all along, usually by paying too much in estimated taxes or too much in withholding.  Be purposeful with your refund and have the money work for you.

Pay off debt

Debt can take a toll, personally and in your business.  If you are carrying credit card debt or a line of credit, you may want to put your tax refund toward paying off some of that balance.  High-interest rates can be debilitating to your financial future.  Alternatively, you may consider paying off other loans such as student loans, title loans, or any other high-interest loans that your business made.

Save for emergencies

Only 40 percent of Americans have enough money to cover an emergency expense of $1,000.  That leaves a staggering 60 percent who cannot afford to pay for a trip to the emergency room, car repair, or broken refrigerator. Instead, many Americans are forced to take out loans or run up credit card bills to pay for emergencies. Now is the time to consider putting some, or all, of your tax refund into an emergency fund, or adding to your current fund. A good first step is to start with a goal of $1,000.  As a small business owner, you may have other costs to consider covering if an emergency happens. Make sure your emergency fund can cover any office expenses or employees’ salaries, should you experience unexpected bumps in the road.

Build retirement and savings

As a business owner, sometimes retirement and savings plans can be put on the backburner as you pour your earnings back into your business. Don’t let this happen. Make your savings and retirement a priority. If you receive a tax refund, consider putting some of it into your retirement. The IRS will allow you to contribute $6,000 toward your IRA and $19,000 towards your 401(k) in 2019. Additionally, think about putting money towards college savings in a 529 plan for your children’s education or your employees’ higher learning.

Donate to charity

You and your business may be involved with various charities, or maybe you are looking for ways to get involved in the community. A tax refund provides a wonderful opportunity to give back to society.

Invest back in your business or start a new one

Have you been looking to add employees or services to your small business? Maybe you are looking to start an additional company.  Consider using your tax refund to take your business to the next level. Reinvesting back in your company, or getting a new venture off the ground, can lead to more significant growth in the long-term.

There are many smart options in which to use your tax refund.  While splurging on personal items such new shoes or concert tickets may be enjoyable ways to spend your refund, resist the temptation and put the money towards your financial future.

Claudia Mollerup-Madsen, Vice-President and Financial Advisor at Morgan Stanley in Houston, was born in Peru, and spent her life as an expat child living around the world.  Claudia graduated from St. Mary’s University in San Antonio with a BA in International Business.  She is fluent in both Spanish and English and has been in the financial advisory sector for 30 years, serving both U.S. and Non-U.S. citizens.

She worked for Merrill Lynch from 1989-1990; Citigroup Private Bank 1990-2001; UBS International 2001- 2009; and moved to Morgan Stanley in 2009.

Claudia has received several awards and honors including being named as one of Houston Business Journal’s 2018 Women Who Mean Business and being honored as a member of the 2019 MAKERS class, which celebrates the trailblazing women of today and tomorrow.   She is also a member of the Morgan Stanley Women’s Advisory Council, an honor chosen by her management team to develop the empowerment and professional advancement of female advisors.

She has been interviewed multiple times as a financial expert on ABC13, Univision, KUHF, NPR, Houston Business Journal and KPRC 950 am.

She is a past board member for The Women’s Resource of Greater Houston and continues to teach financial literacy to women and young women at risk.  Additionally, she is a member of the Houston Livestock Show and Rodeo’s International committee and a USTA Texas region board member, an elite group of tennis advocates promoting tennis.

Claudia Mollerup-Madsen

Vice President and Financial Advisor, Wealth Management Division , Morgan Stanley

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