4 Smart Ways to Spend your Tax Refund

Tax season is in the air.  TurboTax and H&R Block commercials can be found everywhere, Liberty tax has costumed employees at every street corner, and people all over the country are swimming in tax refund money like Scrooge McDuck.  But what to do with all that money?  Get iPhones for the whole family?  Season tickets to the Pelicans (yes that’s a real team)?  Or go out to dinner 200 times this year?

The fact is, all those choices are terrible.  But spending your tax refund money on consumer things is usually a bad idea.  I’m not a fan of preachy personal finance articles telling me I’m doing something wrong.  Unfortunately, this is one of those articles.  And if you’re spending your tax refund money on consumer goods that you can live without, it pains me to say that you’re doing it all wrong.  So here are four correct ways to spend your tax refund:

(Disclaimer:  Any monies received from a tax refund were your monies all along!  Contrary to popular belief, it is NOT a bonus from the government for a job well done.  It is your hard earned money so it should be treated that way.)

1.  Get rid of high interest debt.  This definitely includes credit card debt and can also include debts to family members, car loans or student loans.  My threshold for “high interest” debt includes anything above and uncluding 5%.  But others might have a different tolerance.  But get rid of the credit card debt.  That definitely has got to go.

2.  Contribute to an IRA.  The Roth IRA contribution limit for most broke professionals is $5,500.  Many people get enough tax refund money to cover a full contribution or at least most of it.  Take advantage of this and let the money grow tax free.  A much worse option would be to buy a TV for thousands of dollars and see your money depreciate right before your eyes.  Literally.

3.  Invest in yourself.  This can potentially be the best investment you could make.  Take a course relevant to your field to increase your skills.  Take your boss or a co-worker you admire out to lunch and pick thier brain on any topic.  Or even get some exercise equipment and some videos and start getting into shape.  Investing in yourself the right way can produce crazy results if you stick to it.

4.  Fine, go ahead and buy something you want.  But just one thing.  If you have done the previous three suggestions and still have some cash leftover, go take a nice weekend getaway or have a few nice dinners with your family.  If you’re working too hard, this can be detrimental to your health and wealth in the long term, so sometimes a nice break is what’s needed.  Just please don’t get into more debt.

These are 4 great ways to spend your tax refund money, or any money for that matter.  People do weird things when they get a windfall, so if you have some crazy ideas, just put the money into a savings account and sleep on it.  If you consistently get tax refunds every year, using that money wisely can provide a huge boost to your financial well being.



  1. Kumail says

    Great article; making the decision 5 years ago to use my tax refund to help pay off my student loans was one of the best decisions I’ve made. Hopefully only a couple more years to go before I am free of student debt!

    • Syed says

      Getting rid of student loan debt early is one of the best moves you can make for your future. It can save you tens of thousands of dollars in interest payments, which you get to keep instead of giving to the banks. Glad to hear you’ll be out of debt pretty soon.


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