All of 2018 you anticipated how much you were going to get on your tax refund. Maybe you imagined blowing it all on a jet ski! My husband and I talk about what we are going to do with it all year, dreaming and planning. You have probably done your taxes by now and know exactly how much money you are getting back. Follow our suggestions below for smart ways to spend your tax refund.
Use your tax refund to get rid of some of your debt. If you have been reading our blogs you know that we like the debt snowball method. The debt snowball method advises paying down your lowest balance credit card or loan first while paying just the minimum on the other loans. Once, you have paid off your lowest balance, you move on to your second lowest balance using the extra money you have from paying off the first loan. This creates a snowball effect for paying off your debts. Maybe your tax refund can completely pay off your lowest balance loan! Wouldn’t that be awesome? To read more about the debt snowball method, check out our other article.
Use your tax refund to beef up your emergency fund. Experts say that we should have at least 3 months expenses in a savings account for emergencies. Most people do not have a safety net if they lose their job or an unexpected expense comes up. If you have a sufficient emergency fund, these unexpected expenses should not put you into debt. Also, it is a good idea to keep your emergency fund separate from your day to day accounts. The emergency fund should not be touched for small expenses that come up.
Use your tax refund to invest. There are many options that you could invest in with your money. You can put it towards your retirement in an IRA investment account. Don’t forget that you should start saving for your retirement as early as possible. You could also open a 529 college savings plan for your children or grandchildren. Another option is opening a brokerage account and investing in mutual funds or index funds.
Use your tax refund to invest in yourself. Is there a certification that you can get that would give you a raise at your job? Is there a class you have been wanting to take that would give you a new skill? Do you need startup supplies for a side business? Have you been putting off that expensive dental work? Use your tax refund to pay for one of these things. The positivity of spending your money on self improvement like this will help you in the long run either financially or emotionally!
Use a portion of your tax refund to have fun! We recommend you still use most of your tax refund in one of our above suggestions for financial success. But why not take a small portion of it and invest in you and your family’s happiness? You could use some of your tax refund to pay a babysitter and take your spouse out for a nice dinner. Or use a portion of it for one night away with your family, maybe visit the nearby theme park the kids have been wanting to go to. Remembering to invest in your family time can be just as smart of a way to spend your tax refund.
Do you have a good way you will be using your tax refund? We love to hear your suggestions. Please comment below what you plan on using it for.