It’s tax season again which means many people are hoping for a refund check soon. If you’re one of these people here are some suggestions for making the best use of your tax refund money.
Establish emergency savings
I know what you’re thinking; this has got to be the most boring use for a tax refund but hear me out. How many times have you been struggling month to month and said to yourself, “If I can just make it past these next couple of weeks, my finances will improve.”? Inevitably, it seems that just as things start looking better for you financially, your car breaks down, there’s a new leak in the roof, your kid or your dog gets sick. The crappy thing about emergency and unexpected expenses is that they ALWAYS happen eventually. So instead of being caught off guard next time, expect the unexpected. Fool me once shame on you…
Invest the money
If you already have an emergency savings plan, but you don’t have any investments working for you then it’s time to get invested in your future. The cool thing about investments is the growth with which they can provide you, without you having to lift a single finger. Consider stocks; have you ever wanted to own a piece of a business and get paid for your ownership stake in that business without literally having to do anything? That’s exactly what stock ownership offers! It’s one of the simplest and most effective ways to grow your net worth. The earlier you start, the better off you’re likely to end up. There are so many more tools available to average investor now than there was even 10 years ago. It’s really not difficult to become an investor, you just got to invest a little time. (Read here if you’re interested in cheap or free investing tools)
Take a vacation
If you got your emergency savings and investments already in place, maybe you should look elsewhere to improve your quality of life. If you haven’t taken a vacation in a long time, you definitely should consider doing so. Vacations are important to your psychological well-being. Far from being unproductive, vacations can provide us with reset we need to keep on producing day in and day out at our jobs. I try to take at least a couple of weeks each year to not think about work and go relax for a while. And every time I do so, I come back with fresh eyes and renewed motivation to achieve my goals. Consider it.
Just do something that will improve your quality of life for the long term
If you’re good on your emergency savings, investments, and you take a vacation at least once a year, try to find something that will improve the quality of your life. Avoid the temptation to spend your refund check on something conspicuous or flashy (read here about the dangers of lifestyle creep) that adds no value to your productivity or quality of life. Maybe use the extra funds to take a class about something you’ve always wanted to master, or maybe you want to pay down some annoying credit card debt. Whatever it is for you, make sure it’s truly adding value to your quality of life. If you still aren’t sure what to do read here about setting financial goals.
Erik Goodge is the President of uVest Advisory Group.
He holds a B.S. in Economics and Cognitive Science from the
University of Evansville.