One thing for sure is that your tax refund may feel like free money or an add-on to your current funds, but it really isn’t. You worked hard for your tax refund and the amount in that check is your own hard earned cash. That money has simply just been untouchable until the government returned the borrowed funds. So, rather than spending your tax refund on a one-time, flashy purchase, invest your hard-earned money in a more strategic way.
1. Make a dent in your debt. Let’s be honest, debt is draining both mentally and emotionally. So when deciding where your tax refund should go, make your top priority to pay off current debts. Whether you have credit card bills to pay, student loans to payoff, or even money that you owe your parents, paying off those debts should be a first priority. It may not be the most glamorous way to spend your refund, but in the end you’ll be bettering your financial wellbeing and putting yourself financially ahead of the game.
2. Inch closer to a project or savings goal. Big ticket items like houses and cars can take quite a savings strategy, and a good way to save for those items is with your tax refund. Saving for a down payment on a house, storing cash away for a new car, or even putting money toward your next home project are all great ways to spend your refund. Investing your money toward long-term financial goals is both productive and rewarding, as you could potentially be making an investment for your future and also make a very rewarding purchase in the end. Also, you’ll overall minimize the payments you would have made toward inevitable projects in the long run, all while gaining satisfaction that you are investing in something important to you.
3. Prepare for the good ole years. With the average person starting retirement at 65, it is a great idea to stash your tax refund away now for later in your life. It may be easier and more exciting to spend that money now, but your future self will thank you for saving. The earlier you start saving, the more financially sound you will be during retirement. Plus, the longer your money is invested, the greater the chance it will grow for you in the future.
4. Create peace of mind with an emergency savings. You never know when an emergency situation will pop up, so create peace of mind and add the funds to your emergency savings. Whether it’s an unexpected car repair or a life altering event, stocking away your refund money into a savings is a great option for your tax refund. By creating a nest egg of money you reduce the amount of future worries about reallocating money from your everyday expenses when a serious situation comes up. Save yourself some stress in the future and prepare for the unexpected now.
5. Invest in yourself. Treat yourself by investing in yourself. Is there a class you’ve been eyeing to better yourself or assist in a new hobby, or maybe a conference to help drive your current career? Either way, your value is your most important asset, and taking action to further your abilities is a great way to practice self-care. If this isn’t your idea of self-love, invest in yourself by splurging on an experience. Experiences create memories that can last a lifetime and help relieve everyday stress. While it may seem selfish to spend money on yourself, it is equally important to remember to take care of yourself, too.