Savings Hack: The Do’s & Don’t’s of Spending Your Tax Refund

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If you haven’t heard where have you been?, it’s Tax Day. So first, make sure you file your taxes!

A large percentage  of people will be getting a refund this year. Sometimes a few thousand dollars. If you are getting a refund, here is the do’s and don’t’s of spending that refund.

The Do’s:

  1. Put towards and pay off credit card debt first. Start with the highest-interest rate balance.

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  2. Put towards and pay down a high-interest car/auto loan.

  3. Build an emergency fund. A good goal is 6 months of expenses. Some say more, some say less, but it really depends on your personal circumstances, such as job stability.business-money-pink-coins.jpg

  4. Pay down your student loan debt.

  5. Open up and fund a Roth IRA. You can contribute up to $5,500/year. This is a tax-advantage retirement account.

The Don’ts:

  1. Don’t spend it on a new flat screen tv.

  2. Don’t spend it on a lavish vacation.

  3. Don’t spend it on a brand new, flashy car. (If you need a new car, look into buying used).

  4. Don’t spend it on anything that is a “want”, and not a “need”.

The best thing you can do with your tax refund is pay off debt, save it or invest it! I got a pretty large refund this year due to deducting my mortgage interest, but I wasn’t expecting it to be that large. I won’t lie, my first thought was what could I buy with this money. But, I stopped myself and asked a second question: what could I achieve with this money? Therefore, it went straight into my Betterment investment accounts!

Your turn: What are you going to do with your refund?

Special Offer from Betterment: Ready to invest your tax refund? Get up to 6 months free at Betterment!

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About The Author

Lara

Lara is a registered nurse, living near Denver, Colorado. She has a passion for personal finance and strives to find financial security and independence while integrating minimalism and green living.

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