I used to have a neighbor who was a tattoo artist. I would often hear him complaining about things getting a little slow in the tattoo shop. I was curious because I figured people are always getting tattoos, right? What he told me was surprising.
He said that the shop gets super busy during tax season. It never would have occurred to me that they would be their busiest during that time. I figured that all winter long people would get tattoos because of the restrictions on swimming and other activities that people normally do in the summer.
Then I got to thinking…for many people, their tax return is the only time they will receive a lump sum of money. Shouldn’t they want to make sure they make the right decisions with it?
But it’s not just the tattoo shops that are making a profit during tax season, before I became financially educated. I used to spend my tax return money on the dumbest things. They were so dumb, that I don’t even remember what they were. But I definitely didn’t make good decisions with my money and I regret it so much.
Another way people blow their tax returns is on lots of little things over a short period of time. They go out to eat a lot more and splurge on extras at the restaurant, they go clothes shopping without looking at price tags, and spend money without a plan just because they have it at their disposal.
Booking a vacation was way more fun to me than paying off debt, and buying a new laptop was more important than putting money in our savings account. It was reckless financial behavior and I’m so glad I’ve learned from it because now I can help you make better decisions with your money.
Today I’m sharing the top ways to put your tax refund money to good use.
Start or add to your emergency fund.
I see so many people make this mistake time and time again with their tax returns, I know it’s more fun to go shopping and buy things that you’ve wanted all year, but if you don’t have an emergency fund or if your emergency fund isn’t very big, you need to put some of your money in your emergency fund. Trust me, I have lived many years without an emergency fund and a couple years with one and having some money stashed away for an unexpected event is one of the best decisions that we made.Every boss babe needs to have money stashed away in an emergency fund. Click To Tweet
Get ahead on your bills
When we first started making better financial decisions, we would pay our car insurance for the whole year with our tax return money. This means one less monthly bill to worry about and our money was put to good use. A couple other bills that you can pay in advance include:
- Mortgage, rent
- Car payments
- Credit card bill
- Phone Bill
Pay down your highest interest debt
I know this is not fun at all, but living life with debt is like carrying a 50 pound bag with you everywhere you go. It’s bad for your credit and can cause stress and overwhelm. The best way to deal with debt is to confront it head on and start paying it down. I spend many years ignoring relatively small debt on my credit report hoping that it would just go away, but we ended up having to pay it all off before we applied for a house and my only regret was that I didn’t pay it off soon.
Save for your first home
While there are first time home buyer loans for people who don’t want to put a down payment on house, there are other expenses such as closing costs, moving costs, home inspection costs, and you will probably want to purchase new furniture or other new things when you purchase a home. If you already have an emergency fund stashed away, you should definitely be starting a home savings fund.
Make improvements to your home
Already have a home? Making upgrades to your home can increase its value! Before you go spending your tax refund on unnecessary things, consider upgrading an appliance, changing flooring, or any other home improvement tasks that are going to help you out in the long run.
Start a retirement account or add money to it
If you don’t have an IRA for yourself, the time to get one was like, yesterday. IRA’s are a great way to make your money work for you. Over time your money will begin to compound and grows way faster than putting your money in a traditional savings account. Retirement accounts help secure your financial future. Time flies, and my biggest regret is not starting a retirement fund when I turned 20. It would have grown so much over the past decade.
Invest in the stock market
Another way to put your money to work. Before I started reading about the financial world, I thought the stock market was this whole different world that I didn’t have any business getting into. But what I learned was that I don’t need a financial adviser. I can purchase stocks at home. I learned how to purchase my first stock from this video on youtube.
Wondering which stocks to purchase? The best advice I’ve heard on buying stocks is to invest in companies that are going to change people’s lives. I read this in an article where Shaquille O’neal was talking about the secret that quadrupled his stock income.“I heard Jeff Bezos say one time that he makes his investments based on if it’s going to change people’s lives, Once I started doing that strategy, I think I probably quadrupled what I’m worth.” -Shaquille O'neal Click To Tweet
Invest in your health
Let’s face it: Many Americans don’t make health a priority. There are so many people that put their health on the back burner. I personally need to get invisalign for my teeth but I have been putting my daughter’s orthodontia before my own. She is about to get her second phase of braces. Doctors can be intimidating because of how expensive treatment is. But investing in your health is super important. Even if you don’t need to visit the doctor you might need a personal trainer, a nutritionist, or a chiropractor.
Mental health is just as important as physical health. Seeing a therapist is also a great way to invest in yourself.
Invest in your career
Maybe you need a major wardrobe upgrade (and good quality clothes aren’t cheap these days). Maybe you need a new computer for work or for school. Maybe you are a blogger or youtube influencer and you need a new camera or a high quality filming setup. Don’t hesitate to make these investments. If you play your cards right, your business will grow and that money will eventually make it’s way to back to you
Book a Vacation
If you already have money in your savings account and have a retirement account for yourself it’s always a good idea to expand your mind by traveling. Over time our brains get used to the same old routine that we keep with work and chores, and you are exercising your brain by exploring somewhere new. You are also making memories that will last a lifetime. So book that vacation and live it up.
Treat yourself (a little)
I am not a fan of spending ALL of your tax refund on wise financial decisions because we all deserve to live a little. There is nothing wrong with taking a tiny percentage of your refund and treat yourself. A massage, nice dinner, nice outfit, mani/pedi, girls night, etc. As long as you have put most of your money to good use I say go for it!
Do you have any big plans for your tax refund this year? We are putting most in savings and then using the rest to pay off our car insurance for the year.