The Best and Worst Ways to Spend Your Tax Refund

Getting your tax refund is like getting an unexpected paycheck in the mail; it’s the best surprise ever. Unfortunately, when most people receive unexpected money, the temptation is GREAT to let the money burn a hole in their pocket. Trust me, I know from experience. Since it is tax refund season, and most people have finished filing taxes online, we think it’s a good idea to learn the best and worst ways to spend your tax refund money.

Best Way: Pay Off Debt

Debt, debt, debt, there’s much to do about debt these days. A tax refund is a gift from the heavens because it allows you to start paying off your debt quickly. I recommend using your refund money and paying off any and all credit card debt since credit cards typically carry high interest rates.

Be sure to prioritize paying off the credit card with the highest interest rate first. The truth is having debt is it is an expensive problem that affects many facets off your life. One of the keys to financial success is to have more assets than debt; therefore it is your duty to handle your debt problem.

Worst Way: Take a Vacation

Listen, I know you work hard and quite frankly, you deserve a vacation, especially after paying those pesky real estate taxes, but spending your tax refund on a vacation is not a good use of your money. Think about it, if you have any real needs (paying off debt, saving for retirement, fixing up the house), your refund money is better spent there. You can only live a vacation once, or twice at the most if you take a lot of photos. Forgo the temptation for a quick getaway and find a better use of your money.

Best Way: Invest Your Money

If a few thousand dollars appear at your doorstep, don’t you think it’s a good idea to invest that money so you can grow a few thousand dollars into tens of thousands of dollars?

We recommend using your tax refund to beef up your investments. When it comes to financial advice, please know that it’s best to reach out to your financial advisor, as they can shed light into good investments. The truth is investing is a proven way to make money; if you can discipline yourself to be patient and correctly invest your money, one day you will be a VERY happy person.

Worst Way: Buy a TV

You already watch too much TV as it is and, quite frankly, your tax refund money can be better spent elsewhere. Often times, people like to use their tax refund money to buy toys for themselves.  Frivolous spending is the road to debt; watch what you spend your money on.

Best Way: Fix Up Your Home

Since you presumably spend a lot of time at your home, why don’t you use the extra money to spruce up the place a little bit? Maintaining and improving a home can pay off in a BIG way. Not only does fixing up your home offer mental benefits, but fixing up your home is a great way to raise the value of your home! This can pay off big if and when are ready to sell.

Moral of the Story

The temptation to spend your refund money like you’re a kid in the candy store is great. I want you to know that you should think twice before you spend your refund check. If you pay attention, I’m positive you can find better and more effective ways to spend your refund money. Now go out into the world and make good decisions.