5 Smart Ways to Spend Your Tax Refund
While filing taxes can be a painful, time-consuming task, one thing that people don’t get mad about during tax season is receiving a refund.
Every year when refunds start pouring in everybody starts thinking the same thing – “what I should do with this?” Some people have had a plan in place for months and know exactly what they want to do. Others start batting around the idea of a family vacation, splurging on the latest gadget, or treating themselves to a new wardrobe. While all of those options sound great, they may not necessarily be the best choice for your refund. So how can you make the most of your refund? We have a few ideas.
1. Pay off debts. Having debt is a huge stressor, especially for small business owners. If you’ve been racking up some debt on improving your business, or just because that’s how life can sometimes go, using your refund can be a smart move. If you only have one credit card or loan that’s causing you angst, then the decision is clear where to put the money. But what if you have multiple debts dragging you down? Two popular methods to follow are the debt snowball and debt avalanche, which one focusing on the smallest payment, and one focusing on the highest interest rate.
2. Treat Your Savings Account. One of the oldest pieces of financial advice, when you receive extra money, is to pay yourself first. Often times, people only save what is left over or prioritize spending more than saving. However, investing in your savings account is always a good idea. Emergencies come up, and situations you didn’t intend spending money on can come up when you least expect it. Perhaps this refund becomes the start of your emergency refund, or you have something in mind you want to spend the money on but aren’t sure what. When in doubt, put the money out of sight and it will hopefully be out of mind growing in your savings account.
3. Invest In Yourself. As a small business owner, you are your company. Is there something that you’ve wanted to adopt in your business but don’t know enough yet? Have you been wanting to learn some new skills that could help your business succeed? This would be a great way to spend your refund. Perhaps there is a conference or workshop you could attend on a subject, or there is an online course you could take. By investing in yourself, you’re overall investing in your business which will hopefully lead to years of success.
4. Share With Your Team. We aren’t saying to spend your whole refund on bonuses for your team, but this could be a good idea to put a little money towards a small team outing or lunch. Getting out of the office for a bit is always nice to just clear your head and find ways to bond with your team outside of work. It’s also a great way to remind your employees that you appreciate them and the work they do for your small business. Having engaged employees is key to your small business success.
5. Give Back. Not all spending is created equal. In fact, those who spend their money on experiences, or others, tend to be happier. Using part of your tax refund to give back to a cause, or several, that you are passionate about could be a great way to spend. Make sure that you keep those receipts too because come next tax season you can claim charitable giving as a tax deduction.
There are endless ways that you can spend your tax refund, but ultimately you want to make sure it’s the best financial decision for you and your small business. With all of the options to choose from, it’s hard to make a ‘wrong’ decision, but there are definitely ways to be strategic and get the most value out of your extra cash.