HOW TO SPEND YOUR TAX REFUND (AND NOT REGRET IT)

It’s tax season, which means millions of Americans are anticipating their refunds. Of course, while your tax refund in 2024 may be nice, joy can turn into despair if you aren’t careful. There are a million ways to spend the “found money,” and many of them will bring a fleeting feeling instead of setting you up for success. Members of the American Armed Forces typically receive their refund sooner, which is why we’re helping the military community get more out of their money. While it’s not financial advice, per se, below, we’re breaking down some considerations on how to spend a tax refund and not hate yourself afterward.

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Five Ways to Spend Your Tax Refund Wisely

As the income tax 2024 season gets underway, there are several ways to use the money you receive back from Uncle Sam. It can be tempting to make a fun purchase, and you still can, but making smart financial choices can help you in the long run. Here’s how to spend your tax refund and improve your life at the same time:

1. Paying Back Debt

While it’s not as fun as a new car or a dream vacation, financial freedom is one of the best feelings you can enjoy. Debt can come in many forms, including credit cards, personal loans, and more. Whatever debt you hold, eating away at it or getting rid of it completely can help your finances and mental health today and long term.

2. Save for a Rainy Day

Saving is always a great way to boost your finances but having funds that are specifically allocated for emergencies is important. You’ll want to have funds that are both in the bank as well as easily available petty cash for when electronic funds are unavailable.

Having a financial safety net can be for something as simple as a blown tire in need of replacement or the unfortunate need for serious medical care. Overall, having an emergency fund is a great way to add peace of mind and avoid a cycle of debt should an issue arise.

3. Investing

If you want proof that this is in no way shape or form financial advice, look no further than this section. While starting or adding to an existing Individual Retirement Account (IRA) or 401(k) plan is a great way to go, you may also want to consider investing in something you’re passionate about.

For example, if you’re a musician, having a vinyl collection or signature instrument can provide you with a bit of risk and the reward found in the passion you share.

Regardless of what you invest in, you’ll likely want to seek real advice from a licensed financial professional before doing so. All investments do come with risk and it’s important to not invest into anything that you can’t afford to lose.

4. A Home Project You Keep Putting Off

One method of how to spend your tax refund wisely can be funding a project you’ve been putting off. Whether it’s a much-needed remodel of your kitchen or upgrading your outdoor landscaping, if it helps improve your quality of living and can potentially increase your investment, you may want to consider it.

5. Invest in Yourself

Maybe this means booking that long overdue trip you've always wanted to go on. Or, spending a day at the spa so that you can unwind and reset. From going home to see family, to making home improvements, to finding a new hobby, using a tax refund to invest in yourself is arguably the most rewarding.

Related read: Get a Car With Your Tax Refund In a Few Easy Steps

Spend Your Tax Refund in Different Ways

Depending on the size of your return and your specific needs, you may find that the best way to spend it is through the multiple channels listed above. There’s also nothing wrong with finding a responsible way to splurge while still handling your financial obligations.

For example, it’s much easier to recover from a nice dinner out at a steakhouse after paying off your credit card debt than purchasing a new vehicle you really can’t afford while forgoing a rainy day fund.

Whatever you decide to do with your tax refund, just be sure to focus on both the short and long-term effects of your decision. Doing so will help you avoid regret and set you up for success in the future.

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