The end of tax season is just around the corner. More than 69 million taxpayers have already filed their returns. And the average tax refund is more than $3,000. For recent graduates making do on their salaries, that refund can be a much-needed boost.
When you get a big windfall, it’s important to plan how you’ll spend it. Otherwise, it’s all too easy to fritter it away and then wonder where your money has gone. Below are some tips for putting a little more intention behind using your refund.
Set aside 10% for fun
While it’s smart to use your tax refund to better your financial situation or plan for the future, you may feel deprived if you don’t use any of it for fun. Plan to set aside 10% of your refund for a splurge.
Go on a makeup shopping spree, get tickets for the next ballgame, or plan a special date with your significant other. Do something that will make you feel good and you’ll enjoy.
Donate 10% to charity
When you’re struggling to make ends meet, supporting charities or causes you are passionate about can be hard. Even with the best intentions, donating money may not happen when you’re short on your rent payments. Your tax refund gives you an opportunity to donate money that you otherwise could not spare.
Along with your fun money, set aside 10% for an organization you care about. If you’re not sure where to start, Charity Navigator can help you find ways to give back.
Get your finances in order
Your refund can be a great way to improve your finances and build security. Three ways your refund can help include:
- Paying off debt: If you have credit card debt or are dealing with student loans, interest payments can cost you thousands more than your original balance. Applying your refund toward your debt can help you pay off the balance and save money over time.
- Bolstering your emergency fund: Nearly half of Americans cannot come up with $400 in an emergency. If you fall into that category, you’ll be in a desperate situation if an unexpected car repair or medical bill pops up. To prep for the unexpected, place your refund in a separate savings account that you only touch in the most dire of crises.
- Starting your retirement nest egg: When you’re just starting out in your career, setting aside a portion of your income for when you’ll retire can seem impossible. Your refund can be the perfect opportunity to start your retirement fund.
Make some upgrades
Your refund can go a long way to personally or professionally improving your life. Whether you need to refresh your home or want to take a class, your tax refund can make it possible.
- Paint your room: If you’re in an apartment, the usual bland white walls can feel depressing and unmotivating. Use a part of your refund to get a few buckets of paint, a tarp, and some brushes. A new coat of paint in your favorite color can boost your mood and make you feel more relaxed.
- Get new sheets: The best part of being an adult is finally appreciating sleep. Make your bed a restful retreat by investing in a new sheet set. A good quality, higher thread count set will feel much more luxurious and can even improve your rest.
- Take a class: If you’d like to boost your career or are thinking of switching to a new field, use your windfall to enroll in a new class. Learn graphic design, improve your public speaking skills, or learn how to code.
- Attend a conference: Conferences can be a great way to network in your field, but they can be costly. Between tickets, airfare, and hotels fees, they can cost hundreds or even thousands of dollars. If you’ve wanted to attend a conference, but delayed because of cost, put your refund to work and use it to go to an industry event.
- Buy new technology: If you’ve been nursing along an old computer or smartphone, consider upgrading to a new version. Getting a new computer can boost your productivity, and if you have an online side hustle, can even increase your income (and provide a tax break next year!).
Using your refund
If you’re getting a tax refund this year, plan ahead and use it wisely instead of frittering it away. If you choose how you’ll spend it carefully, you can improve your financial security and improve your home life.
For more information on managing your taxes, check out the beginner’s guide to filing taxes.