Tax return season. Sure, it might be a little annoying to fill out all the paperwork, but once you see that money come right back into your account as a result it’s always worth it.
Many people receive fairly sizeable returns, and when that’s the case, it’s hard not to want to go out and spend it on something luxurious. However, that’s probably not the best way to handle your money. Most financial planning advice encourages tax return recipients to save, save, save.
While putting that money right into your savings account does seem like the most reasonable course of action, it’s understandable that it can be challening and boring, even. So here are some ideas for smart, regret-proof ways to spend your tax return.
Pay off old debts
You might think that buying that new flat screen television is going to feel more satisfying, but at the end of the day, having your debts paid off is going to feel much better. Pay off as much as you can, starting with the highest interest debts, as these are only going to cost more in the long run.
Additionally, you should use this as an opportunity to reset your financial goals and ensure you stay on top of your debts moving forward. Ensure you’re making regular payments so you have a good credit report.
The best way to improve the value of your money is to invest it. Do your research before you put your money into anything or see a financial planner.
You can also invest in things like your home. Consider doing some home improvement projects or renovations that will increase the value of your home. Whether that be replacing old appliances with new, energy efficient ones, or redoing the bathroom.
You want to be sure whatever project you’re doing increases the value of your home. For example, removing storage space to make a bigger room without replacing the storage can actually decrease the value as people are easily turned off from a home that doesn’t have a place to keep their possessions.
Put it in an interest earning account
While depositing money into a transactional savings account feels responsible (and not to say that it isn’t), it is better if that money is working for you. Instead put the money into an interest earning account.
Of course, you can create your own savings account for whatever you want! Perhaps you want the money to go to a big trip or a new house or an emergency fund – whatever it is, give the account a special purpose and you’ll likely feel more accomplished as you put money in.
Spend it on something you need
First we should define the difference between ‘want’ and ‘need’. A want is something you desire, but can live without, like a new bag. A need, however, is something you can’t function without like a car repair or that dentist appointment you keep putting off. Investing your money into yourself is going to be one of the best things you can do with your money.