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What? A personal finance blogger is telling me to spend money? What backwards world did I just step into? Don’t fret yet! Yes, I am giving you ideas of the best things to spend your tax refund on, but (most of) these options are financially friendly!
Best Things to Spend Your Tax Refund On
The best thing you can spend your tax refund on is debt if you have it (and I don’t mean getting shiny new debt!). Put that few hundred extra dollars towards a credit card bill, student loan, or even car payment! It will make you feel good about yourself and push you a little further down the road to freedom!
Do you have money squirreled away for a rainy day? If not, you can use that nice chunk of change that you get from Uncle Sam to start saving! Experts agree that you should have three to six months of living expenses saved up in case of an emergency. Getting a tax refund is a great opportunity to either start an emergency fund or shore up the one that you already have.
Yeah, my personal finance blogger friends are going to hate me for this one. But I’m a firm believer that you only live once, and you have to enjoy the time you have. So if you don’t have a lot of debt and have your emergency fund topped off, treat yourself! Take that trip! Money spent on experiences is always better than money spent on stuff.
Another awesome thing to spend your tax refund on is something that makes you even more money! That’s right, I’m talking assets and investments! My favorite investment for beginners is Vanguard’s total market fund, but there are plenty of options. They key here is to buy an asset, not a liability. That shiny new car is not an asset!!
I get it, sometimes stuff happens and we need to spend some of our tax refund money on fixing that stuff. If your house needs a new roof, or you need a new appliance, now is a good time to get it. You won’t have to budget the money out of your paychecks and the tax refund can kinda feel like free money. But don’t go buying these things just because you can. If your old dryer works great, there’s no reason to upgrade. Be smart about it. These things aren’t assets, so only buy them if you absolutely need them.
Yep, my PF blogger friends are totally going to crucify me! But what’s the point of having a little extra cash if you can’t spend it on something cool for yourself? Now I’m definitely not advocating spending all of your tax refund on something fun, but I do recommend taking about 10% of it and blowing it on something that you will enjoy. That might be a nice dinner out, or some new shoes, or even a mini-shopping spree. Giving yourself this little treat will help you feel like all the rest of the stuff is more worthwhile, and it will give you extra motivation to keep up the good spending habits. Think of it as a reward for being smart with the rest of your money!
What am I going to do with my tax refund?
I like to spread my money out a little bit, so I’m going to use a lot of these ideas for this year’s tax return. First, I’m going to top off my short- term emergencies saving account (yes, I have multiple savings accounts). Next, I’m going to add a few hundred bucks to my Vanguard account. After spending the majority of my return on savings and investments (gotta take care of future Melanie firs!), I’m going to have some fun with the leftovers. I’m going to add a little bit of extra cash to my Egyptian vacation fund, and I’m going to take about a hundred dollars and buy some new clothes.
What are you going to do with your refund? Let us know in the comments!