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Impactful Ways to Spend Your Tax Refund

Receiving your tax refund can feel like a gift of cash, but in reality, it’s really just your own money being returned to you. If we consider our tax refund as a gift from the government, we may be inclined to spend the money as we would if we received it as a gift. Remembering that the money has always been your money, but was just on loan to the government, may help you feel differently about how you spend it. Listed below are some impactful ways to spend your tax refund. Each option will have an impact on your current or future self or someone you care about.

Impact Your Future

Pay down debt - Wipe out a debt or pay it down to decrease your monthly payment amount. Help yourself and your future by addressing past spending like credit card debt, student loans, or a mortgage. When choosing which debt to focus on first, choose the debt with the highest interest rate. Likely, this will be credit card debt. Emergency fund - Start your emergency fund with your tax refund or bolster your current emergency fund. An emergency fund should consist of 3-6 months of your expenses and can be used for any unexpected financial situation such as a flat tire, lost job, or medical expense. Your emergency fund will ensure you won't need to dip into savings or investments if a financial emergency occurs. Save for a goal - Set your future self up for success and set aside your tax refund for a financial goal. An extra contribution to your financial goals such as a home down payment or dream vacation can help you reach your goal faster. Invest for retirement - As we know from compounding interest, a small amount of money invested today will grow to become much more for your future. Your tax refund can be used as next year’s IRA contribution for your future retirement.

Impact Your Lifestyle

Continue your education - Give yourself the gift of growth and invest in your education. Going back to school or getting a career-focused certification will help to push you forward in your career or can bring you personal satisfaction and accomplishment. Repair or replace something in your home - If something around the house needs fixing or replacing, your tax refund may be the financial surplus you needed to make the change. Small improvements like a fresh coat of paint or landscaping may not be a top priority within our discretionary spending but your tax refund may give you the extra push and motivation to make those home improvements. Make a lifestyle improvement - With a little extra cash on hand, try making some improvements to your everyday life. Some examples may be switching to organic produce and cleaning supplies, purchasing a gym membership or deciding to buy local when possible.

Impact others

Make a donation - If you’re feeling generous or believe spending on others will bring you more joy than spending on yourself, use your tax refund to make a donation. Your tax refund can be used as a lump sum donation, or you can choose to save your tax refund and allot a yearly donation of a specific amount from that fund. Constructively gift to a child, grandchild, niece or nephew - Give an impactful and instructive gift to someone you love. While contributing to a college fund is always impactful, you could also contribute to a summer camp fund, music lessons, a subscription to their favorite magazines or new sports equipment.

There are many impactful ways for you to spend your tax refund this year and it’s fun to think about all the possibilities. Your tax refund is your hard-earned money so you are entitled to spend or save it in any way you decide. The being said, spending your tax refund in an impactful way seems like a great idea to us.


Lead Advisor, InvestEd.

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