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5 Tax Saving Mistakes you should not make

Date of Posting : June 28, 2020

You might think that your investments will help you save some good amount of money at the time of tax filing, but the truth is – knowingly or unknowingly, you might be committing some serious tax saving mistakes. Here are five such mistakes that you shouldn’t make at all.

Investing everything in stocks that will hold up your money for long
There is no denying that the stock market is a great place to invest your money – but only if you don’t need that money in a few months. It is essential to understand that investing in stocks that will keep your money parked for a long period is not a sensible decision.

You should always have some ready cash with you to meet exigencies if at all they arise. A portion of your savings should go into investment options that can be easily liquidated when needed. You can put some cash in your savings account or a certificate of deposit (CD).

Saving less money for retirement
While we all love to have a good paycheck from our jobs, not assigning a significant amount of your salary towards your retirement contributions is a big mistake indeed. You might think that you will save money gradually, but what’s important is to save money now – when you could. So, increase your retirement contributions to have a good amount of money with you when you retire and also to save more money on tax.

Investing all funds in one place
Another common mistake that people make, either due to lack of time or lack of knowledge is to invest all their funds in one investment vehicle. Remember that the ideal investment portfolio is the one that has diversified investments. While it is not a sure shot way to protect you against losses, doing so will help you minimize the risk.

As the adage goes – don’t put all your eggs in one basket. Thus, if you or your tax advisor is putting all your money in one form of investment, then stop it at the earliest. You might end up losing everything.

Investing in haste
You want to save more on tax, and a particular investment option is said to be making huge returns. You don’t want to lose the game and end up putting a substantial amount of money hurriedly into it. Well, you know what? That’s one of the worst ways to save your taxes as you might end up losing more than what you could imagine. Just because an investment option works for you, it doesn’t necessarily mean that it will be good for everyone. Know your tax-saving needs and then find the most suitable options that help you meet them.

Investing in something that you don’t understand
Putting your money in stocks or investment options that are difficult for you to understand is a grave mistake. Just because their advisors assure them of great returns, many people often park their cash in complex investment vehicles that are difficult to understand and high on risk. What’s the result?

They end up making huge losses. Therefore, whenever you want to invest your money in some investment vehicles, always think them through and go ahead only when you fully understand their terms and modus operandi.

Wondering how to avoid these mistakes? Simple. Call us on +1 469 828 0829 to speak with our experts.