5 inventive ways to spend your tax return(Read article summary)
Okay so you could put your tax return money in savings, pay down debt, or a Roth IRA, but sometimes the best investment is in yourself. Check out these ways to give back to yourself and those in your life with your tax return.
It’s that time when all the financial “gurus” begin to tell you what to do with your tax refund. According to the IRS, the average refund this year is $3,034 – up 3% over the same period last year.
So, you’ve read or heard the same old advice. Granted, it’s valid. But it’s old. Pay down credit card debt, fund a Roth IRA, begin or bolster an emergency reserve. It’s all good information.
But let’s try something new for once.
Here are five unorthodox ways to direct your tax refund.
1. Treat the grandparents and parents to dinners.
The knowledge you’ll gain from asking questions to those with money experiences (good and bad) will be invaluable. Listen, learn, write down the responses. Gaining perspective from those who have been handling investments, credit, debt or financial failures is worth more than any Roth contribution.
2. Purchase experiences, not stuff.
According to the authors of the book “Happy Money: The Science of Smarter Spending,” your money goes a long way to provide happiness when it’s directed toward experiences that create memories, not stuff like new smartphones. Eventually, your satisfaction with goods diminishes, but memories last a lifetime.
3. Take on education.
Learn a skill that will increase your “ROHC,” or return on human capital — the return on you as a future earnings machine. Many people are underemployed and reluctant to switch gears to learn new skills or spend the time on what’s required to succeed in our post-financial crisis economy. Perhaps a vocational school is worth your time. There’s a dearth of skilled laborers today. The U.S. Department of Education is a good resource to find accredited schools in your area.
4. Do something for your soul.
Money you share with others can foster inner satisfaction. Purchasing items for a local animal shelter, contributing to a favorite charity or helping someone in need can add to your happiness bucks.
5. Do something for your heart.
With the health care industry going through tremendous change, one fact is clear: Getting and staying healthy is going to be a priority. First, your insurance carrier will demand better “numbers” from you to provide premium discounts. For example, cholesterol, blood sugar and weight should meet or be better than normal ranges for your age. Second, joining a gym and spending on healthy meal choices can mean fewer visits to the doctor (and your doctor probably doesn’t have much time for you, anyway).
Again, you’ve already heard a lot of ideas about how to spend your tax refund, but now may be the right time to try something unusual by investing more in yourself and the world.
Learn more about Richard on NerdWallet’s Ask an Advisor.