I personally have not filed my taxes at the time of writing this post. I have been thinking of effective ways to spend my tax refund which is what compelled me to write this list.
In no order of importance here is a list.
Build Your Emergency Fund
Although I did say this list has no order of importance, this is the most important. It is recommended that you have 3-6 months worth of expenses in your emergency fund.
In a recent post, I challenged you to strive to build an emergency fund that last 12 months. It can be difficult to build an emergency fund so why not use “free” money to boost your emergency fund.
Life has a way of throwing a wrench in your plans, why not be ready for it?
Pay Off Debt
Debt can be plain nasty. Especially mismanaged credit card debt. Being debt free is not only great for your finances, it also gives you peace of mind and a sense of accomplishment.
The average amount of credit card debt in Canada is $2,627. In the states, the average credit card debt is approximately $5700.
There a few a approaches to paying off debt. check out this post on 2 ways of paying off debt.
Contribute To Your Retirement Plan
Most people I talk to do not think about retirement in their working years. I strongly believe in investing for the future and with good reason.
You will not always be able to work. Having money to spend in your later years will prevent you from having to work in order stay afloat.
Invest In Passive Income Ideas
Do you want to make money in your sleep? You can use the tax return to invest in passive income ideas.
The best part about passive income is amount of work required to make money. You do all the work upfront and then a little bit of work here and there to keep the cash flowing.
Invest in your yourself
Warren Buffett, one of the worlds greatest investors, once said, “The most important investment you can make is in yourself.”
You can take a course, buy some books, learn a new skill, etc. The point is to use that money to better yourself.
I will be using some of that money to buy books and learn a some new skills.
Invest in your children
College tuition is very expensive. If you have young children then maybe investing in their college tuition might be the route for you.
If you think a post secondary education is expensive today, imagine what it will be 15-18 years from now.
Saving for your kid’s future education can help ensure that they graduate debt-free.
If your kids decide to not go to college, then you can use that money elsewhere.
Go On Vacation
Sometimes you need to treat yourself. This could be going on vacation, buying a nice dinner, etc.
You’ve worked hard all year so reward yourself a little. That is assuming the rest of your finances are in check.
I will be using that money to continue building my emergency fund and investing in myself.
Comment below and let me know how you spent/will spend your tax refund.