It’s tax return season! If you’re looking forward to a tax return you might already be planning out how you’re going to spend it. A new pair of sneakers? A trip to Chile?
Everyone deserves nice things. If you haven’t had anything nice in a few months, using your tax return to treat yourself is not a bad idea. However- if you’re in a lot of debt, or feeling financially anxious because you’re in a bad money situation, your tax return is a good chance to do something financially healthy for yourself. Using the money to improve your financial life is less flashy than taking a trip, but it might ultimately be the best move.
Here are three things you can do with your tax refund for a healthier financial life.
Pay Off Debt
This is one of the best things you can do for your financial health. And paying off debt can be sexy- the feeling of making a large payment is a pretty intense high!
If you have tens of thousands of dollars in debt, it can be hard to feel motivated to take your tax refund and put it towards debt. You might be thinking ‘I’ll be in debt forever, so why not enjoy my life now?’
And that’s a valid question. I’d ask you to ask yourself this question: is my life right now going to improve by having less debt? Will I feel less anxious? If the answer if yes, making an extra debt payment is exactly the right thing to do.
Put It To Work
Making your money work for you is the tried and true path to wealth. So you can take your tax refund and invest it. Investing can mean a lot of things. It can go into your retirement accounts, or your taxable investments. Or it can be used to help you pay to get your house painted, and thus increase the house value.
Depending on where you are in your financial life ‘investing’ doesn’t always mean just in the stock market. (Though that’s always a good option!) Put your refund to work for you in some way this year.
Put It Towards The Future
If you’re a parent who is paying off your own student loans, maybe you want to use your tax refund this year to kickstart your child’s education fund. You can use it to open a 529 account, which your child can use for education expenses in the future.
In the same vein, you can tuck it away into your down payment fund, or save it for your property taxes at the end of the year. use this month’s money to help your future self out!
Your tax refund is your own money; you’ve already put in the time to earn that. How can you use it so that you’re living your best life?
Looking for more great articles on how to handle money? Try these articles: