There is something dangerously intoxicating about seeing that tax refund clear in your bank account. Suddenly your bottom line surges and you have all of this new room for indulging.
In years past, I have been consumed by this temptation, immediately updating my spring wardrobe or taking a frivolous trip. I’ll start off with these noble intentions to become a savvy financier, and then I see a pair of shoes and I get all “treatyoself.” Because paying bills and being responsible is such a snooze fest! Summer is upon us and it’s high time for living my best life.
So cue the bottomless mimosa brunches, the clockwork mani/pedis, and the closet update. Meanwhile, anything that does not fall under immediate gratification rolls over another year, no improvement to show for it. My financial bonus inevitably depletes and life goes back to a cash flow sustained paycheck to paycheck.
But I realize my ideas about finances are not only irresponsible but unsustainable. In accordance with my spring cleaning resolutions, I am determined to employ some responsible money management efforts. And it’s time I recognized my tax refund has the perfect timing for a jumpstart.
Let’s take a peek at some ideas for the more lasting and enriching uses for a tax refund.
Before we get started, we’ll make a strategy:
Design a refund budget by itemizing some of your financial goals. If you know you have large debts or an impending expense, financial goals or an indulgence, order each by priority and figure out where your refund would be best allocated.
You can use this free download.
Pay down debt, especially any with higher interest rates.
As long as you owe another, they control your financial prioritization. In order to avoid penalties, you pay them first and yourself second. I do not oppose credit cards in general, but they mutate so quickly into crippling credit card debt. And the ones with higher interest rates have you stuck in a never-ending cycle. You should be trying to pay anything with high interest down as much as possible. Bonus points for paying it off entirely.
Make a big dent in that thing you’ve been saving up for.
Whether you want to travel abroad or buy a new car or renovate/repair something in your home, allocating your refund towards this makes may put this goal within arm’s reach.
Make an investment.
Nothing better than making your money make more money. You may stumble upon something sustainable that will increase your income long term. An investment can provide multiple income streams, which can improve your financial security.
Start your business or hobby.
Maybe you’ve found gym memberships too expensive. Or perhaps you always wanted to take a candle making class. Learning a new skill but the course was too expensive? Maybe you’re at the beginning stages of a starting your own business and this will help you launch or acquire necessary resources. Investing in yourself is always has a guaranteed reward.
Increase your emergency or savings funds.
Stashing cash is not the most enjoyable way to use your taxes but it is foolproof. It requires patience and self-control. You can’t go wrong by adding more money to retirement or making a large deposit into your kid’s college fund.
This may not have transactional value but the return on investment is one of the most enriching ways to spend money. Donate to something you believe in. Help a family in need. Find a campaign to invest in on Kickstarter or Indiegogo. Give a percentage to your church.
Taxes have one of those cringey tones to it, but it doesn’t have to be all dull. If you find any leftover wiggle room, you deserve a reward for all of that financial responsibility you just did! But don’t get carried away. A surplus of $200 does not a trip to Paris make. You don’t need to accrue more debt simply because you paid some off. Treat yourself to a nice meal or buy those shoes you saw. Get a pedicure. Try one of those weird luxury spa treatments. Whatever you do, do not put yourself back at square one.