It’s tax time. The time some Americans dread because they have to pay their hard-earned money to the government. However, 75% of Americans (TIME) look forward to tax time with glee because they’ll be getting back a refund. Yeah! Free money.
Not really, of course. Your tax refund is just the government giving back money that was already yours to begin with. The government is giving back money that you loaned to them.
Because so many Americans see a tax refund as free money, they’re not careful with the refund. “When people view their tax refund as a gift or some kind of reward or bonus, they spend it differently. They’re more likely to splurge, and it’s easier to rationalize purchases” (TIME).
Admit it, if you’ve gotten a refund in recent years, haven’t you said to yourself that it’s okay to blow some of it (or all of it)? After all, you work hard all year long.
Well, precisely because you work hard all year long, this year I want to encourage you to do something different with your money. This year multiply your refund by using it to make more money or save you money. Here are some ideas:
1. Take a college class or two.
Often, you can earn more at your job if you pursue additional education. Why not use your refund to pay for a college class or two so you can make more money at your job? If you already have a B.A., consider using it for a Master’s.
2. Invest in your house.
No, not with a remodel, but with ways to help you save money all year long. If your house has old, drafty windows, why not use the tax money to upgrade to new, energy-efficient windows? What about getting more insulation? Or buying a programmable thermostat so you can keep the house cool in the winter when you’re gone all day at work?
Invest money in your house in this manner will save you on utility bills all year long, for years to come.
3. Invest in your retirement or a college fund for your children.
Consider your own retirement first. Use the money to contribute to your Roth IRA or 401(k). If you’re already making contributions to your retirement, use the money to establish or add to a college fund for your children.
4. Add to your emergency fund.
Most financial experts recommend a 6 to 12 month emergency fund. If you don’t have that much yet, add your refund to your retirement fund. A nice size refund could easily add two to eight weeks to your emergency fund, depending on your living expenses.
5. Buy something that will help you save money.
If you grow a garden in the summer or like to stock up on produce when it’s in season, consider buying a deep freezer. Doing so can help you buy food during the summer when it’s at rock bottom prices so you can save money during the winter when produce is more expensive. Consider what other items like this you could buy that would help you save money over the long term.
What do you typically do with your tax refund if you get one?