Tax refunds. Yep, we’re getting one this year. Of course, I would have rather that money spread throughout the course of the year, but we had a few unknown factors.
We had even saved up to pay taxes and we’ll get to allocate that money also. A double bonus!
So now comes the question: How do you spend a tax refund? There are many options, but here are a some traditional ideas + few ideas we’re brain storming.
How to Spend Your Tax Refund: Traditional
1. Giving-Let’s start with giving, since that is a high priority for many people. Some might call it a tithe or some a love drop. Whatever you call it–giving is a financial habit and character trait that will help you remember that money isn’t everything in life.
2. Emergency Savings- This could be a quick way to sock away money for your starter emergency fund or perhaps grow your existing 3-6 months emergency fund.
3. Allocated Savings- Replenish those accounts of annual expenses you’re saving for: christmas, vacations, car repair, new computer, a cruise to Europe on Queen Mary II?
4. Pay Down Debt- Paying off debt could be the best return on your money. Paying off a 15%-25% interest credit card is much better than a 1-2% return on a CD or 12% investment.
5. Extra Payment on Mortgage- Want to take a chunk out your mortgage? Here is your chance! You’ll reduce not only the principal, but future interest. With your tax refund you could also set up a bi-weekly payment schedule and reduce the number of years on the mortgage. How sweet would that be?
6. Fund HSA Account- If you’ve thought about starting an HSA (health savings account), this could be a good starter fund.
7. Fund ROTH IRA- Roths are arguably the best place to invest for retirement as the earnings grow tax free. You could partially or fully fund a ROTH for you and your spouse.
8. Children’s College Fund- College is only getting more expensive, start now by starting or adding to an ESA or 529 plan.
How to Spend Your Tax Refund: NonTraditional
These ideas are most likely only good, if you’re out of debt and have already done some of the other above traditional ideas.
1. New Clothes- When is the last time you’ve really spent money on a new wardrobe? This could be a chance to get a new look or prepare for a new career with new business clothes.
2. Take a Class- You want to be the next Rachael Ray? Then, you’ll need some cooking classes. Perhaps you want to to learn Adobe Photoshop (Affiliate Link), or a new language. A course at your local community college will do the trick and on a budget you can pay cash with.
3. Start a Business- Come on, you’ve thought about it. Now you’ve got a little seed money to start that business idea you’ve been wanting to try.
4. Join a Gym and Hire a Trainer/Nutritionist- Investing in your health could pay back dividends in the future with lower health costs and the ability to work longer.
5. Hire a Coach- Want to kickstart an area of your life: personal, spiritual, business, vocational, etc? Hire a coach who is an expert in that field to get you going in the right direction.
6. Stock Your Pantry and Fridge- I love the site of a fully stocked freezer and pantry. Ease the strain on your monthly grocery bill and stock up on staple items you’ll use the rest of the year.
7. Give it All Away- You heard me right. If you’re in a good financial situation, why not give away your refund to someone who really needs it or to a good cause?
How will you spend a Refund? Any creative ways to spend your tax refund?