20 Feb The Five Best Things To Do With Your Tax Refund

If you collected (or will be collecting) on one of the 111 MILLION tax refunds that will be issued this year, then you’re probably wondering how you should spend it! Well you don’t have to worry anymore because I’m going to tell you exactly what you should do with it! No need to thank me. In fact, you probably won’t when you see that buying a new flat screen or Chanel bag isn’t included on this list…but you know what’s better than all that? Financial security, peace of mind, lower stress levels and a brighter future.

If you’re interested in those things, then read on! And if you don’t want all that financial freedom mumbo jumbo, so I didn’t completely waste your time, here’s links to the newest, cheapest Chanel bag or a good deal on a flatscreen TV. Okay, now that we’ve covered that, let’s get to the money!

Top Five Ways to Spend Your Tax Refund (in order)

1. Start an Emergency Fund

This is the foundation of your financial success. $1500 is the recommended minimum. As of right now, almost 70% of Americans don’t have $1000 in cash in their savings so this would put you in the top 30%. I know many “gurus” say $1000 because its catchy, but people like Dave Ramsey have been saying the same number for over 20 years. Guess what. Inflation called and it wanted to tell you that since the year 2000, something that cost $1000 would now cost you $1476. Hence why you need $1500. If you already have this, then good for you! Move on to the second best thing!

2. Pay Off a High Interest Rate Credit Card or Loan

Credit cards can hang around 18-25% which means you are paying them a lot of money in interest if you carry a balance every month. Give yourself a raise stop paying VISA, Mastercard, American Express or whoever your money is going to for the “privilege” of borrowing money. Use the refund to knock some of these out. If you don’t have any credit card debt, then congrats and move on down to #3.

3. Knock Out Principal on Student/Private/Medical Loans

The majority of the population is paying off student loans still but private and medical loans can be taxing monthly payments as well. These usually have higher balances but lower interest rates so if your credit cards are all finished, then consider knocking out some of these loans. You will feel so much better seeing a chunk of them eaten away as you leap a few steps ahead on your financial journey! If you are at a good place with these, then first off, be proud of yourself and let’s hop down to numero quatro (that’s #4 in espanol) (and espanol is Spanish in Spanish).

4. Put the Money into an Index Fund or Stock

If your debt is under control, then investing is the next step on your financial journey. If you have stocks or investments already that you are comfortable with, then it’s great to add to your position if they are still good buys. If not, then consider buying an index fund or the stock of a company you believe in with a good reputation (and preferably a dividend). Using tools on Etrade, Fidelity or sites like CNBC to research a good investment is very helpful. Consider this a long term investment and plan to hold it for 5-10 years or more! Plan on adding onto this as more cash becomes available to you!

5. Invest in a New Skill

The best investment is in yourself. Whether that’s furthering your education formally through a college or online school, or taking courses on new up and coming skills like coding, social media management, becoming an expert in Google/Facebook ads, or setting up a dropshipping account. These are great options that can either increase your income or give you new income opportunities that will quickly improve your financial footprint (considering you spend all that extra cheddar wisely). You are your biggest asset so an investment in yourself is an investment in your future. Remember, the world is changing quickly and traditional education is not adapting fast enough to keep up. This is an unprecedented time in the history of mankind to retrain yourself and become extremely valuable to a global network of people accessible through the web.

Remember this, the average person sees or hears about 3000 ads per day. That increases during the tax season and you will see the ads compelling you to spend your tax refund there. Obviously, if you have a need for something material, go for it. But don’t waste it on “things” unless its something that is a true need like a washing machine (because yours is broke, not because you want a new side-loader) or fixing your car’s A/C.

Make a change and use this money to get ahead of the game. Remember, your life is a journey that is shaped by the resources available to you!