With tax season here and many people expecting a tax refund, I thought it would be fun to list some of the smartest (and dumbest) ways you can spend your money.
Smartest Ways to Spend Your Tax Refund
Think of tax refunds as an easy way to improve your finances and life in one swoop.
- Pay off high interest debt. In the past we’ve used tax refunds to pay down or even off some of our debts including credit cards, car loan, and our student loan. Not only have we improved our bottom line overall, but we’ve freed up some money on our monthly budget, giving us breathing room for unexpected expenses.
- Jump-start your savings. With so many Americans living paycheck to paycheck, having a financial cushion can make a huge difference.
- Get healthy. You can make that dollar go further and save even more money down the road by investing in your health now. Perhaps you want to bike more, but your beach cruiser is on it’s last wheels. Go ahead and use some of that tax refund and snag a great deal on your next bike.
- Invest more towards retirement. Using all or a portion of your tax refund for retirement contributions can give you some great returns on your investment.
- Give to others. Perhaps you’re doing well financially speaking, but you don’t want to just blow that money on anything. Making a charitable contribution to a cause that is near and dear to your heart can be rewarding on many levels.
By the way, you don’t have to use all your tax refund for building your finances, go ahead and have some fun, but don’t go overboard.
Worst Ways to Waste Your Tax Refund
Speaking of going overboard, let’s have some fun and look at some ways you can waste your money.
- Gamble it away. Using your money to gamble in Vegas or buy a ridiculous amount of lottery tickets is the fast track to being broke.
- Blow it all on a vacation. If you want to go on a vacation, then go for it – just don’t spend every single cent just because you have it. There are some great travel guides online and at your local library that can help you find some fantastic vacation spots and still have some money left over.
- Day trading your tax refund. Investing your money and trading your money are two completely different things and in many cases will give you two completely different results. Investing your money by creating a diversified portfolio that fits your goals and investing style is smart. Putting your refund into a stock because of a 2 minute recommendation you heard on the television (or read on the internet) is not.
- ‘Loan’ to loved ones. No, I’m not suggesting that helping out family and friends is in itself a dumb move, I actually think it’s noble. The dumb move comes how and whom you lend out the money.
Loaning money to those family and friends who seem to constantly suffer an emergency (‘my bill is due tomorrow!’) and who refuse to listen to your advice about saving money (‘but I want to have fun this weekend’) will not mean you won’t see your money again, but it may also become a source of stress and resentment that you wish you never had. There are ways to help your loved ones without loaning money.
The reason I’m harping on these ‘dumb’ money moves is because I’m quite sure that you’ve worked really hard to earn your money and I’d hate to see you lose it.
If you still haven’t filed your taxes, TurboTax can help you get them done easily and accurately so you can get closer to using your tax refund wisely.
Thoughts on Tax Refunds
I shared some ideas on how you can spend your money, I’d love to get your take on it. If you’re expecting a tax refund this year, how are you planning on spending it?