11 Productive Ways to Spend Your Tax Refund
The tax season is back and you’re probably waiting for your tax refund. I’m always tempted to splurge and blow it all on fun things. But if you’re wisely worrying about the future and how to make productive use of your tax refund, then, here’s a list of options to make sure you use it well.
1. Save it for a rainy day
Saving a little out of your paycheck is a good plan. But that makes up for just a tiny bit each month and will take years to build up to a substantial amount. Who knows what emergency may hit you before you get enough together to tide over such eventualities. Crises usually come without warning, be they financial, medical or accidental and an emergency fund is a life-saver for times when fate decides to give you an unpleasant surprise. Nothing makes you sleep better than knowing that you don’t have to take out a high interest short term loan for unexpected expenses. Your tax refund could be your umbrella!
2. Pay off debts
All kinds of loans and credit card debts should be your next target when you get your refunds. This helps you reduce and eliminate all high interest obligations aiding you to improve your financials, which works out to be equal to the monthly installments you’re paying. If the tax refund can’t cover your entire outstanding amount you can at least get rid of some of it to reduce the interest that you’re paying and most importantly cut down your stress along with it.
3. Use it for your mortgage or insurance pre-payments
A huge part of our monthly expenses can include mortgage payments. Reduce the principal by paying off part of it with your tax refunds. This will save you lots in future interest payments. You can also relieve your burden by making some of your payments in advance provided there aren’t any penalties for pre-payments. You also have the option to do something similar for your insurance premiums.
4. Invest in necessities
Not only do home improvements make your home more comfortable they also do wonders for the value of your property. Tax refunds can allow you to do all those small things you’ve been holding off on like repairing/refurbishing the roof/windows, giving your home a new coat of paint, replacing kitchen appliances and/or light fixtures, improving the plumbing, etc. Some of these projects will even help you lower your energy bills.
Alternately you can invest in getting a new part for your car which has been giving you trouble.
5. Do something for you
If a career boost is what you need then it would be a great idea to spend some of the tax refund money on yourself by taking a course that will enhance your professional prospects. Training in an area that makes you more employable or could get you a promotion, learning a new language or upgrading yourself in your area of expertise are investments that could go a long way in giving you the professional push that you’re looking for.
6. Give your business a boost
If you’ve been looking for funds to kickstart your business, then this may actually be a good way to use your tax refunds. You are basically investing in something you passionately believe in and the chances of returns therefore are very high. Up your production, invest in promotion and marketing or upgrade technology. What can be better than investing your windfall in something that will enhance your income in the long run.
7. Earmarked Savings
Plan future purchases and start a savings account with amounts attributed specifically to expenses you may need to make in the future. Make sure that it is not easy to access so that you can’t withdraw until the time you have actually saved it for.
8. Low risk stocks, IRA and Life insurance
With some research you can find a good broker who can invest your money in conservative, diversified investments at low expense. Stocks usually give better returns than savings accounts and if you’re not going to need it in the very near future, putting away money for a long term is a great retirement plan. If you have an Individual Retirement Account, then you can contribute a large chunk of your tax refunds to it and smile when you retire. Then again, if it gives you peace of mind to invest in a life insurance, there are many low-cost alternatives available which will ensure that your family is protected if something unpleasant happens.
9. Future tax burdens
Self–employed individuals who are obliged to make estimated quarterly tax payments can relieve future stress by paying them upfront. Tax refunds can help you relax about future tax payments and allow you to concentrate on the job at hand. That way your expected future income is also freed up for you to use productively.
10. Get some good karma
This is your chance to earn some good vibes. If you have some leftover after clearing your debts and planning for the future, tax-exempt charity is an awesome way to make you feel good. Donate to a cause you really believe in and touch someone else’s life positively. You can even fund a charitable event that is close to your heart. There is the alternative of helping out someone in need or surprising an underprivileged child/family with a treat. You won’t only make their day, you’ll make yours too.
11. Treat yourself
In the end, there’s always the option of making yourself happy with some of the refund amount at least. That spa you wanted to go to or the expensive hair treatment you’ve wanted to get for so long, a nice vacation, a fancy dinner for your family, a new gadget, in fact any experience you’ve wanted for a long time and hasn’t been in your price range will be a wise investment to build up long term memories and contentment.
Whatever use you put it to, make sure you spend your tax refunds in a way that gives you a sense of security, enhanced professional/business opportunities, some fun times and most of all peace of mind.
I think people like Bruce Lee say the best things in the best possible way – “Be a practical dreamer, backed by action”. Do I need to say more?
Take care. Spend wisely.
Magbè
