Buzz
You've already filed your 2017 taxes and a refund is on its way. Well done! (And kudos for filing early—you’re less likely to fall victim to scams that way.) The IRS reports the average refund amount exceeds $3,000, a nice little financial boost.
Perhaps you've been eyeing that luxurious skincare item or planning a special evening for your partner, and now you'll have the means to make it happen. That's wonderful, but let's not forget that there are more 'prudent' ways to spend that refund. Let's dive in.
Put It Into Savings
Nearly 60% of Americans surveyed by GoBankingRates had less than $1,000 in their savings accounts in 2017. That’s concerning! You've probably heard it before: building a financial cushion is one of the wisest moves you can make, and it's recommended to have three to six months' worth of expenses saved up. If you save your tax refund this year, you'll be well on your way to that goal.
If you're happy with your current savings, consider putting your refund toward one of your financial goals, such as a down payment on a house, saving for your kids' college, or funding a vacation. Set up a separate savings account (preferably one with a high yield) and park it there until you've accumulated enough. This might seem like the dullest option, but it’s what I’m choosing to do with mine.
Put It Into Investments
Perhaps you're thinking about capitalizing on the impressive gains in the stock market. That could be a smart move, and there are more opportunities than ever for you to invest in a way that suits your needs.
If you're new to investing, don't worry—we have plenty of resources to guide you through the process of getting started:
You might want to look into opening an IRA:
Or socially responsible investing:
Or using a robo-advisor:
Or investing in cannabis:
Or diving into cryptocurrency:
There are so many options!
Pay Down Debt
Here’s my advice (pun intended): Focus on paying off your highest-interest debt first, like your credit card balance. “The quickest way to end your debt struggle and get off the debt treadmill is to direct your resources toward the bill with the highest interest rate, while paying only the minimum on other balances,” write Helaine Olen and Harold Pollack in The Index Card.
But it’s not always so simple, especially if you have large balances. It can feel overwhelming, especially if your refund doesn’t cover the whole amount. A different approach: Pay off the smallest balance first, no matter the interest rate, then tackle the next smallest, and so on. Known as the Snowball method, this strategy works well because it feels more manageable and gives you a sense of accomplishment. Ultimately, you’ll find the method that works best for you.
Give a Portion (Or All) of It Away
There are countless causes that could really use your help. People are crowdfunding to cover medical expenses. Reproductive rights and immigrant protections are under threat. Schools can’t afford basic supplies for students. Consider using your mini-windfall to support a cause that matters to you, especially one you’ve been meaning to donate to but couldn't when money was tighter.
Treat Yourself to Something Fun
That being said, it’s your money to do with as you please. Whether it’s splurging on a new jacket, a video game, or even a Bitcoin mystery box, who am I to judge? Everyone deserves a little indulgence now and then. Just don’t blow it all at once. Or, go ahead—it's your call.
