If you feel inclined to either:
a) put it every cent of it towards debt
b) put NONE of it towards debt
I get it. It’s easy to lean one way or the other. But I think you should actually do a little bit of column A, a little bit of column B. Keep reading for why this approach works!
7 Tips For What To Do With Your Tax Return
1. Spend at least 10% of your tax return on things that make you happy
Yes, even if you have debt. I know this is a bit of a #controversialopinion, but I want you to pay down debt in consistent, sustainable manner that doesn’t make you hate your life. Because guess what? When we deny ourselves ev-er-y-thing in the name of debt repayment, most of us end up feeling empty, resentful, and deprived ... and then mindlessly shopping to deal with those feelings. We end up spending MORE! Share on X
So let’s just opt out of that spiral shall we? Take 10% of your tax rebate and lovingly, intentionally spread it around on multiple purchases that bring you joy. This could be a fancy coffee every Friday afternoon, a few new pairs of cute underwear, or a massage.
Don’t actually know what makes you happy? How To Figure Out What Makes You Happy.
2. Pay off your credit card
Okay, this is the unsexy advice you knew I was going to give you, right? Let’s stop giving VISA 18%!
A few tips to make it less painful:
- Cash in points or use the ‘purchase eraser’ option to reduce your balance first
- If you’re carrying balances on multiple cards, pay off the smallest balance first. It’ll make you feel proud of yourself and give momentum to keep going! If that’s not motivating to you, put your refund towards the card with the highest interest rate.
- If those unpaid balances came to be through mindless online shopping, delete your credit card info from your computer. You’d be AMAZED how much less you’ll buy when you have to get up and go get your credit card!
3. Contribute to your IRA or 401K
More advice you saw coming! In a perfect world, your employer matches your contributions and you can max out your 401k.
P.S. If you’re self-employed and you’ve maxed out your Roth IRA, check out a SEP IRA! Contributions are tax deductible and you can contribute waaaaay more than a Roth IRA. Up to $58,000!
4. Invest in Yourself
At the risk of sounding like an inspirational poster hanging in the break room, you are your biggest asset. Why not spend some of your tax return on a class, workshop, coaching, or therapy that will make make your life easier or better?
You could take a course on grant writing, coding, or social media management if you want to make yourself a more competitive job applicant. Or use a bit of this money to buy supplies for your Etsy shop, buy a laptop to help along your freelance writing or get some headshots to kickstart your acting career.
5. Improve Your Living Space
I don’t know if it’s just me, but when I like where I live, I spend less money. When my kitchen is filled with sharp knives and good pans and lovely bowls, I’m less likely to order takeout. When my living room is comfortable, cozy, and thoughtfully decorated I want to have friends over, rather than going out and spending $$$ on a plate of mediocre pasta and two glasses or wine.
Even really small investments can make your space feel nicer! A few plants, a cuddly throw, framing photos from your travels. None of these things are particularly expensive, but they’ll all make a space feel more lovely.
6. Donate to something in your neighborhood
Life feels better when we like where we live. What donations could you make that would improve your neighborhood?
A few ideas:
- Your local library
- The community garden
- The local food shelf
- Gofundmes for neighbors who are going through a tough time
- Your local firefighters
- Buy something at the school or church bake sale
- Be an on-going member of a theater or museum
7. Pre-pay a reservation or appointment for something a few months from now
Spread the joy out! Give a gift to your Future Self and pre-pay for something lovely a few months from now. This could be a massage, a manicure, a weekend away, or tickets to an event. Whatever it is, we get 30% of our enjoyment of an experience from anticipating it! So increase your enjoyment of this event by scheduling it for a few months from now.
Unless you get a huuuuuge tax refund, you probably won’t be able to do all seven of these things. But if you choose a few – contributing to your IRA + booking a hotel room for 2 months from now – you’ll be able to toe that line between fun + financially wise!
I don’t pay tax (yay for scholarships) but that means I never have the joyful surprise of getting tax back. You scare me, Sarah, with your talk of retirement funds. For now, my 23 year old self needs petrol in her car and my 65 year old self will have to deal with that. I’ll make it up to her when I graduate, of course.
We were lucky enough to be able to claim the first-time-homeowners tax credit, so we greened our house…literally. Painted the kitchen and bathroom green.
And, um, bought a super-expensive sofa.
INVESTMENT PIECE!
(and we socked the rest away for green home improvements, like the energy-efficient windows we will probably need to get. gulp.)
It’s in my savings account now, but I’m probably going to use it to go to San Francisco with my BF this summer!
The majority of mine went to, yes, credit cards and recent surgery bills. I did, however, put aside $200 to make myself giddy with soon. New boots? Paints and brushes? Baking supplies? A teensy tiny vacation? Only time and my mood will tell…
A: I had no idea you were so young! I´ll be 30 in August, us onld ladies need to think about things like this!
kristine: nice couches are so important, eh? We upgraded from our Salvation Army find last year and it has been GREAT!
Kelly: What fun!
Christa Nicole: Smart Girl!
Um….. what refund? lol! none for me.
Funny, I’ve had that response often about my age! Dare I ask how old you imagined me to me?
I’m hoping to stick my tax return at least partially in my savings account. I need to get some self control, y’know?
We’re looking forward to taking advantage of the first time home buyers tax credit. Won’t be able to enjoy that until next year tho!
I did my taxes early and used the money to have my dream bicycle built custom for me. It makes much more sense than my cruiser bike here in hilly SF, and the love and I can now sell our car, which is awesome.
I spent my '09 tax return on enrollment in a holistic health counseling program. Best thing I ever spent a tax return on!
I always take a portion of my return and go get a proper bra fitting! I buy two or three, and then take pics of the tags of everything else I tried so that if I saw a sale through the year I always had my size in that brand in my phone!
Yesssss! I do the same! Good bras make everything fit and feel better!