Got a Tax Refund? Here's How to Spend It
If you’re reading this, you probably filed your taxes. Great work! Taxes are weird. We pretty much always pay tax on everything we do and buy, our work is taxed, our property, and so on. Then, at the end of the year, we’re told to “file” them. Do you have to? Kind of. I know people who haven’t filed their annual returns in years and they’re not in jail nor are the police after them (for tax reasons, anyway). The most confusing part is that the government seems to know exactly how much you’re supposed to owe or receive as a refund, and yet they make YOU go through a series of forms and questionnaires to calculate the number yourself. If you’re wrong, you get audited or go to jail. Cool.
However, if you maximize your deductions and expenses (if you have a small business) you can earn a sizable return, which you can really save your ass if you’re paying debt, tuition, medical bills, and more. If you’re truly working with the refund as a surplus, then you can use this money to treat yourself in ways that’ll have you saying “I CAN’T WAIT TO PAY MY TAXES NEXT YEAR!”
Probably not, but you know, maybe!
The following items are how I’ve used my refund in the past few years. Hopefully, you’re inspired enough to treat yourself and help your community in ways that are meaningful to you.
Invest in your passion project
If you've been dreaming of starting a new project or pursuing a new hobby, now is the time to invest in it. Use your tax refund to purchase supplies, take a class, or set up a workspace. Not only will this help you develop new skills, but it can also provide a sense of fulfillment and purpose. With last year’s tax return, I started a business that allows me to produce comedy events all over New York City. Sure, it didn’t cover my expenses, but it was a great startup cost buffer. I’m grateful for the surplus and what it has allowed me to do.
Pay off high-interest debt
While it might not be the most exciting way to spend your tax refund, using it to pay off high-interest debt can be incredibly beneficial in the long run. By reducing the amount of interest you owe, you'll save money in the long term and improve your credit score. My credit score recently just jumped 76 points after paying off my credit card debt, which has been plaguing me for the better part of two years. We all have reasons that we might fall into debt, but if you’re able to allocate the funds to pay off a chunk, or the principal entirely, the impact it’ll have on your credit score and mental health is significant.
Plan a future trip
Itching to travel? Same here. If you have your eyes on a destination and even track flight prices to get notified of the best deals or times to book, use your tax refund to get a headstart on the process. Even if you're not able to take the trip right away, you can use your refund to book flights, accommodations, or activities in advance while prices are low. This can help you save money in the long run and give you something to look forward to. Apps like Hopper can help you track those deals year-round.
Invest in yourself
Consider using your tax refund to invest in yourself. This could mean signing up for a course or workshop, hiring a career coach or personal trainer, or purchasing books or software to help you develop new skills. By investing in yourself, you can improve your earning potential and overall well-being. About 5 years ago, my low cost of living afforded me the opportunity to use excess funds to open an account at European Wax Center. Generally, the cost-per-wax is on the pricier side, but if you buy a package of waxings, you can save big time. The best part is that the package doesn’t expire, so my broke ass is still using those brow wax passes of yesteryear. There’s nothing like giving a gift to the future you!
Give back to your community
If you're in a position to do so, consider using your tax refund to give back to your community. You could donate to a local charity, support a crowdfunding campaign, or volunteer your time and skills to a local organization. Not only will you be helping others, but you'll also be making a positive impact on your community. One of my favorite things to do to help the less fortunate is going up to individuals on the street, asking if they’re hungry, and getting them the hot meal of their choice. Sometimes it can feel a bit abstract to donate to charities online, and there’s nothing worse than donating to a charity you believed to be reputable but later turned out to be fraudulent in some way. I prefer to help people directly when I’m able to. If you’re in a city where you feel you can safely approach people and gift them a meal, it’s a good way to directly help someone who is quite literally a part of your community.