Tax season is here, and I recommend starting as soon as you can!
The IRS reports the average tax refund is $3,120. That is a huge chunk of change, and some of you may be expecting even more money than that.
When I worked in retail I saw many people use their tax refunds on a crazy amount of clothing. I understand that people need to be clothed, but is there a better way to spend your tax refund?
After all, your tax refund isn’t just the extra money many people think of it as. Really it’s money you have already worked hard to earn.
Here are 8 smart ways to use your tax refund. You may decide to use all of your tax refund in one area or a combination of them all. Whatever you decide, it’s your choice!
1. Put your tax refund towards retirement.
Putting all, or at least some, of your money towards retirement can be a great way to spend it. The plus side is you still get to keep your money, which is a decision I’m sure you won’t regret decades from now.
2. Pay off your debt.
If you have debt, especially at a high interest rate, then you may want to focus your tax refund on paying some of it off.
You can stop spending all of your hard-earned money on interest fees and instead be a little closer to paying off your debt. Or, maybe you can even pay off your debt completely!
Just think about how less stressful life would be without all of that debt.
3. Beef up your emergency fund.
An emergency fund is something I believe everyone should have. However, according to a report by Bankrate.com, 26% of Americans have no emergency fund whatsoever, and only 40% of families have enough in savings to cover three months of expenses!
If you don’t have a fully funded emergency fund, you should start one. They can help if you were to lose your job, have a medical expense, have a home or car repair, and more.
This will prevent stress brought on by unexpected bills or even prevent you from going into debt trying to pay them.
Related: Everything You Need To Know About Emergency Funds
4. Learn something new with your tax refund.
Investing in yourself can be another great way to spend your tax refund. You might decide to go back to school, take a certification class, learn a new skill, or something else.
Investing in yourself can be a great way to get motivated about life.
5. Start a business.
Your tax refund may be just what you need to start the business you’ve been dreaming of, and many businesses can be started cheaply.
Just look at blogging. You can start a blog for just a few bucks a month! That’s what I did, and now my blog is my business and full-time career.
Don’t get me wrong, some businesses can be expensive to start. If you’re truly dedicated, your tax refund may help you launch your business in the best way possible.
Related articles:
- 75+ Ways To Make Extra Money
- 10 Ways To Make Money Online From The Comfort of Your Home
- How I Made Over $300,000 Through My Blog in 2015
- How To Start A Money Making Blog Of Your Own
6. Take care of yourself.
Is there an expense you’ve been putting off for a long time because you couldn’t justify spending the money on yourself? Maybe this is a visit to the dentist, a trip to the doctor, a massage, some alone time, or something else?
If this describes you, then you may want to think about spending some of your tax refund on yourself.
7. Donate to a cause you believe in.
Is there a cause you’ve been wanting to donate to but just couldn’t afford to earlier? If you have extra money left over from your tax refund, then now may be the time.
You might even be able to claim a tax deduction on it next year.
8. Splurge a little.
Splurging isn’t always a bad thing. I believe if you can truly afford it, then splurging every now and then is just fine.
Maybe you’ll decide to go on a vacation, redecorate your home, buy yourself something you’ve been putting off, go out to a nice dinner, or any number of things.
The key is moderation and making sure you can actually afford what you are spending your money on.
Are you getting a tax refund this year? How do you plan on using it?
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I didn’t get a refund this year because of my freelance income. I think I’ve passed the point of receiving refunds. I’ll either break even or owe.
Ha, same here!
At least it’s good to know you’re making money online from the comfort of your laptop working from home that you either break even or have to pay money. That means your affiliate income is on the plus side of things .
I actually used refund to completely pay off my visa debt AND my student loan debt!! I am so excited not to have those weighing down on my shoulders anymore!
Great job!
We used to always use part of our tax return towards our emergency fund. We finally have that were we want it! This year we got a bit of a refund and used it to purchase a few things we needed and save for some travel. Plus, we saved a bit for our “summer fun fund”. We did this last year so we had money to go to the beach, see a few movies, and go to the water park… Stuff like that. It was so nice to have money set aside for fun things last year that we might not have money for each month, so we did that again this year!
Awesome! Where are you going?
I like #1 through 5. Anything about investing, saving, or starting a business.
Unless you are already retired and generate massive yearly passive income far above what you need, then you should be saving or investing it!
Thanks!
This is the first year I have an actual refund! I’m so excited. In years past I was always a dependent so I have never really had more than maybe 100 bucks to spend after my tax refund. This year I’m really looking forward to my refund, because we can finally afford to buy some clothes for ourselves, I am going to splurge on a Michael Kors bag, and get to spend some money on possibly a blog theme!
Even after all that we’ll still have money left over to put towards savings. Words cannot describe how grateful I am to be in this situation but I’m also so excited to finally get to splurge.
Nice!
Tax refund? What’s that? We owe every year and claim the lowest we can claim. We beef up our savings contribution so that we are prepared, but it sure does suck watching that money disappear from our account.
Yeah, I’m not looking forward to seeing how much I’ll owe next year… ah!
This year we’ll put a solar energy plant on our roof.
Awesome! How much is that?
Depends on the size.
We will buy 10 260 Watt (peak) Modules for 160,88 Euro each.
And we will buy a solar inverter from SMA (best solar company ever) for 748,80 Euro.
And 10 stands for the module for 55,08 Euro each.
+ 19% value-added tax
= 3,461 Euro
But I don’t know how much the assemblyman will take for installing it.
Awesome. I am super interested in solar. Definitely plan on adding it to the RV one day.
We’ve always been pretty practical with our tax refunds in the past, but I know a lot of people find that to be “boring”, so I think it’s ok to have a balance of spending and saving your tax refund.
We’re pretty boring with ours in the past as well. I don’t think I ever splurged with it, haha.
Omg, I haven’t even started mine yet! I think this will be the last year I get a refund since I was still employed last year. I probably should just put it towards next years since I’ll owe.
Mine are done, thankfully!
My husband and I used our tax fund to beef up the emergency fund! We live in an expensive city, so getting to 6 months of expenses (our goal) is a challenge, but the refund got us a few steps closer.
Great idea!
All great ideas. Anything but using that “new found” money as blow money. I’ve always been floored by those friends who get their refund and have it gone in a matter of a week with none of it invested any way in their future. It’s not “new” money, it’s money you loaned the government during the year. You certainly wouldn’t just spend a paycheck on material things? Or maybe you would, lol. I end up paying a bit every year. And I’m okay with that. I make a game of it in a way, trying to get my tax refund/over-payment as close to $0 as possible.
Yes, I agree!
I’m getting a tax refund this year which is I shouldn’t be too excited about because it really only means I gave the government a interest-free loan. But I’m not gonna lie, I like getting a refund, especially since I owed last year. I can never decide what to do with it, so I will probably put some in savings for a house and some in retirement.
Great ways to use your tax refund 🙂
I like number 1 and 5. Putting your tax refund towards retirement or starting a new business are both excellent investments for your future!
Yes!
I used my refund to catch up on some bills so I could have a little breathing room. I hope one day I can save my refund!
Yes, we are getting a tax refund this year. We will put around 90% of the amount right in our retirement and use a small amount to treat ourselves to a nice, weekend getaway, close to home 🙂