I’ve probably spent my tax return (still pending due to the fact I’ve yet to organise my taxes) about a million ways in my head. A small trip, new laptop, pay back my parents a little bit (never going to happen).
But here are some ideas, on what you shouldn’t do with your tax refund so as to avoid been one of the people who year after year spend their tax return on meaningless things.
Spend, Not Invest
Investing that money might seem like a drop in the pond of monetary need. That said, with compound interest and time, wondrous things can come of a bit of investment, even if the initial amount seems somewhat paltry.
Not Paying Down Debt
How often are you given a leg-up in terms of money? Not frequently. If you’re looking to take a chunk out of your debt, then your tax refund is the perfect way to get your teeth into it. You’;; save money on interest and really knock a bit of a dent into the debt as well, making the repayments over the rest of the year easier to motivate.
Johnson suggests that, should you spend the refund, it could be worth thinking about investing it in something that will earn you a tax credit the following year. Solar panels are the obvious example- using the money to purchase an item that gets partially refunded (as well as saves you immense amounts of money off your energy costs) is certainly a worthy means of distributing your refund.
Failing To Create A Memory
If you want to spend your refund- and I’m not as agin the whole idea as Ms. Johnson, due to a dire need for a computer- spend it on something worthwhile. The worst of all feelings is to piss away a good amount of money, when you could have spent it on doing something you’ve always wanted to do. Book a plane ticket, buy a new couch, use the money for something that will stay worthy until the next tax refund comes around.
Not Investing In Yourself
Using the tax rebate to fund a class or work experience project is as much of an investment as putting aside the money and letting compound interest do the rest. Eventually, that class might be the difference when you try and get a new job or ask for a raise, and it will pay for itself a hundred times over.
A Deposit On Debt
Using your tax refund as a downpayment on debt is probably not the wisest move known to man. Yes, it might be hard to get a loan on the car, but refunds are a great opportunity to clear debt, not consolidate it. Be especially wary of using it on something that won’t increase in value.
Sustaining The Unsustainable
If you’re hanging out for the tax refund just to get by, now might be a good time to think about how you can restructure your general finances to make ends meet in an easier manner. The once-a-year windfall shouldn’t be the only thing keeping you afloat and, if it is, time to look at your general financial health.