Tax season is, perhaps, the one time of year that nearly everyone dreads. However, many people enjoy a silver lining in the form of a tax refund, which may provide an unexpected (although typically minor) infusion of cash. While it may be tempting to spend your tax refund on a temporary pleasure, such as a shopping spree or dinner at an expensive restaurant, using the extra money strategically can yield future benefits.
Here are a few creative ways to use your tax refund—that you probably won’t hear about from your financial advisor:
- Start a “freedom fund.” Do you ever have days when you just want to quit your job and take some time to regroup until you figure out your next step? Should you ever decide to do so, a freedom fund is a savings account designed to financially sustain you. Ideally, it should be separate from your regular savings and left untouched until you need it. At the very least, a freedom fund will provide you with peace of mind that you have alternatives if your job becomes unbearable.
- Invest in personal development. Between work, family, and all the other stresses of life, many people put personal development on the back burner. Personal development may include taking steps to improve your career in the long-term by cultivating your skill set, reaching fitness goals, pursuing a hobby or personal passion, or simply taking more time for relaxation and self-care. Regardless of what personal development means to you, the extra money from your tax refund may be used to help advance your goals. For example, you may consider using the funds to take a course, obtain certification, or hire a life or career coach.
- Check off an item on your bucket list. While tackling the items on your bucket list may be a splurge, it is a splurge that is strategically designed to fulfill important goals that you’ve set for your life. By applying your tax refund toward your dream vacation, a special item that you’d like to buy, or an experience you want to have, you will ensure that the money is spent on something meaningful to you rather than an indulgence you’ll ultimately regret.
- Cultivate some goodwill. If you are interested in investing your tax refund in the joy of giving back, there are countless options for doing so. In addition to standard charities, microloans offer a great way to help someone else—either domestically or abroad—achieve their dreams. Microloans are small, short-term loans with low-interest rates that are offered to entrepreneurs who may have trouble accessing traditional loans due to a lack of collateral or credit history.