Are you getting a tax refund this year? How exciting! While your ultimate goal should be to get a small tax refund (that means that you’ve chosen your withholdings accurately), any refund feels GREAT and feels like a huge bonus. There are so many fun ways that you can use that money.
Before you start spending, it’s good to evaluate your current financial goals. Are you saving for a big purchase? Looking to make some money?
Here are a few brilliant ways that you can use that tax refund money.
Pay off Debt
If you’ve got debt, this is a great first choice for your tax return. No matter how much debt you have, throwing your tax return at it can make a debt – or even pay it off!
Why pay off debt with your tax return?
- No more paying interest on your debt
- Feels like a raise because it frees up money from minimum payments
Invest Your Tax Refund
Want to make some money with your money? Feeling comfortable with your bills and how much cash flow you have coming in? Throw it in an investment fund!
Just make sure that you know the current IRS contribution rates for the tax year.
Fund Your Emergency Fund
If you don’t have 3-6 months of expenses saved up, consider adding your income tax return to your emergency fund. A fascinating survey at GoBankingRates.com says that 69% of Americans have less than $1000 in savings. Many people cite living paycheck to paycheck, high cost of living, or debt as being what is holding them back from saving.
If you’re in an emergency situation, having 3-6 months of living expenses set aside could potentially be the difference between survival and bankruptcy.
If you’re like me, you’re saving for a down payment on a house. Last year, our tax refund went straight into our house savings fund. It was a great boost for our savings, and helped us make progress towards our goal of saving at least $100,000 for a down payment.
Start a Business
Want to turn your money into more money? Start a business.
Before we go on, I want to be clear. DO NOT JOIN AN MLM. Multi-level marketing, or direct sales as it’s often called, is a great way to lose money. 99% of people who join MLM companies lose money. They may promise fantastic income levels, but the reality is that anyone who does make large amounts of money in MLM does it while standing on the backs of those who have lost money. I highly recommend reading this article, MLM’s Abysmal Numbers, from the FTC website.
Start a business doing something you’re good at! Are you a writer? You can freelance (that’s what I do). Do you love creating handmade crafts? You can learn how to create an Etsy shop! Have a knack for Pinterest? That’s what my friend Nicole over at SaundersSays does: she’s turned her skills into a six-figure business!
Investigate the state laws in your area, figure out if you need to create an LLC, research start up costs (like supplies or training), and you can get yourself started!
Buy an Experience
Want to spend the money? Go on an epic vacation, or do something you’ve always wanted to do. Make it significant – don’t just go out for dinner. Whatever you do, do it right.
It’s ok to want to take advantage of the time that you have and make memories with friends and loved ones.
Rent a red convertible and drive along the west coast. Go for a hot air balloon ride. Buy concert tickets, and rent a limo to get there. Go on a vacation to a foreign country. Use that money to enrich your life and give you an experience to talk about forever.
Invest in Education
Have you always wanted to learn a new skill? Use that money to pay for education! So many community colleges offer extra classes, and adult learning centers offer certification courses.
Want to learn how to program? Take a class!
Good at Microsoft products? Get certified!
Want to learn how to play a musical instrument? Find a teacher in your area, or even find one who offers lessons via Skype or FaceTime.
Best of all, when you invest in education, you can potentially use those new skills to negotiate a higher salary at your workplace.
Are you anticipating a tax refund this year? What do you plan to do with it? If we get one (we haven’t done our taxes yet, but will soon!), we’ll be putting it in savings for a down payment for a house!