I’m almost ready to file our taxes this year, and it looks like we’ll be earning a nice fat refund. It’s not always easy to know what we should do with the refund money though – do you blow it all or be responsible with it? The short answer is that you should incorporate both options, but be smart and know your limits. Here are some ideas on how to spend your tax refund this year.
Give Yourself Some Spending Money
We all know that the responsible thing to do is to save the money or to pay off debt but you also do need to be able to have some fun. You worked hard all year round, some of that refund money should go towards helping you to blow off a little steam.
Set aside a portion of the refund money to spend on anything that you want and ditch the guilt. It could be 10% or 50%, it all depends on what your financial goals are. If you are always responsible with your money, you’ve likely put off some wants so that you can hit your savings goals. You have to plan for the future but also have to live in the present. You cannot put off having fun forever.
Finance Your Dream
Perhaps you have always wanted to visit Italy or would love to take a cooking course. Using your tax refund as a means of funding your dream is really great for your soul. Think about it for a minute – 10 years from now will you regret not putting more effort into making your dreams come true? If the answer is yes, consider using your tax return accordingly.
That said, you should look at something that has some degree of importance to you – something that you ordinarily would not have been able to do. A trip to Italy, for example, can be a once in a lifetime experience. Who knows what your circumstances will be in 10 years time – you have to live in the present as well.
Improve Your Financial Future
There is something to be said for using your tax refund, or at least part of it, to help build a better financial future. Using it to shore up your emergency fund is a great way of doing this. If you’re behind on your retirement savings, get a head start on your Roth IRA for this year.
There are many good investment options out there. Take some time and do your homework and you’ll thank yourself later when you check your investment accounts.
Use It To Reduce Everyday Living Expenses
Using your refund for maintenance projects that you have been putting off can pay great dividends in the future. Take your car, for example. Having it serviced allows it to run more efficiently overall and this can save you in gas costs and repairs. You can also have an energy audit conducted in your home to identify what appliances are “gas guzzlers” in terms of power. Consider replacing appliances for ones that are more energy efficient in order to save money every single month. A one-time expense now can pay dividends down the road.
Overall, your refund should be used to improve your life – whether that means using it to have fun or using it to bolster your nest egg. Take a few minute to consider what will have the best impact on your life.
How are you spending your tax refund this year?