They say it is the most wonderful time of the year. All the receipts have all been found. The taxes have been filed and sent in. And now, people run gleefully to their mailboxes, awaiting their tax returns. Summer is just around the corner (here in sunny California), and adults go to bed, with dreams in their head, of new cars, condos, and private jets.
It is tax season, and already I have heard from numerous people what they plan to do with their tax return. Some cant wait to blow it all on a crazy, extravagant night, while others plan to bury it in the ground and wait for some impending global collapse. We have had several people ask us what we think is best way to spend their tax return. We here on Onourwaytowealth.com strongly believe in investing (as our numerous articles may lead you to believe). However, surpluses in general can be an interesting discussion point. Is it better to spend the money outside our regular budget, seeing as how you only live once, or adopt a more frugal view point and save it altogether?
The average national tax return for last year was $3,034.
With that in mind, let’s talk about what NOT to do first.
DO NOT: Let Your Money Slip Away
The worst thing you can do with your surplus is let it slowly slip away from you. It is all too easy to put the money in the bank for “Saving”, and then slowly, and unknowingly eat away at it. With $3000 in the bank, you may think I can afford to eat out more this week. I just got that tax return after all. Followed by I can afford to do a little splurging on shopping this month. I just got that tax return after all. Before you know it, you have eaten through your tax return, and what do you have to show for it? A few nicknacks here and there, a few extra meals, but nothing memorable or tangible. This kind of spending is most likely to leave us scratching our heads, asking ourselves where all our money went. It is critical to be intentional with your spending. Buy only what you really want or need to buy, and don’t let the extra money you saved slip away because of a relaxed budget.
With that out of the way, here are some things that WE think are great ways to spend your tax return. As always, we believe in INVESTING, but remember; wealth is not just about the number of zeros in your bank account!
Take a Trip, Discover Something New! (Invest in yourself)
With $3,000 you can travel almost anywhere in the world if you are smart about it. Ever wanted to see Europe? My wife went on an amazing 11 day tour of Europe through Triple A (AAA) for around $2000! She said it was one of the most amazing experiences in her life (outside of meeting me of course), and would highly recommend it to anyone interested in traveling.
I love flight deals, and am constantly watching discount monitoring sites like www.theflightdeal.com. You can find so many amazing deals to places all around the world, so if you are looking for adventure and are flexible on where you want to go, I would highly recommend checking them out! Just this week they posted a flight from New York to Italy for $550 round trip. That is unbeatable!!!!
Maybe you have a fear of flying, or wanna stay more low key. Take a road trip to explore the US! I have had the amazing benefit of getting to see a large amount of the states via car growing up. You can do it as cheap or expensive as you want, have some amazing adventures, and see the world like never before. You may develop a new found love for a state you have never been too. Who knows where opportunities could lead.
Learn How To Invest (Invest in your future)
I remember exactly what I did with my very first tax return (as small as it was). I put every single cent directly into the stock market in my own personal account. Why you may ask? I was living on a very limited budget, and could barely afford to save a couple extra bucks each month. I knew that I wanted to learn how to invest and trade, but I didn’t have anyone in my life to teach me. I decided to go it alone, and used my tax return as a risk free investment. I felt more comfortable and relaxed, knowing that if all of my money magically disappeared into the market, it would be ok. This was because the money I was risking was outside my regular budget. I bought and sold stocks at will based on what I thought sounded cool, more playing than anything else. However, this was an important step in my life because it helped me cross the scary bridge from THINKING about investing to ACTUALLY investing. From this point on, I started to learn about market trends, brand strength, and so much more. I hear so many people say things like If I only had a million dollars to invest. Well, now you have a few hundred dollars to invest, should you so chose to do so. Take this opportunity to learn without fear of making ends-meet! If you want more info on investing for beginners, check out our article on Stress Free Investing!
Fix Up What You Have (Invest in your present)
Several years ago, as I sat in the rain with a set of jumper cables in my hands for the second time that week, I swore that I would buy the nicest car money could buy as soon as I got my first paycheck. Today, I drive a used, reliable, older vehicle, because I found the value of trading up. With $3000, you can buy great car, that runs without any problems. It may not be the shiniest or fastest car, but $3000 can get you reliability. Already have a reliable car? What could you afford if you sold your current car and added $3000 to it. Maybe instead of reliability, you are looking for something to spice up your life a bit more. If so, check out our article on spicing up life with fun purchases.
They say home is where the heart is, and for me having a home I enjoy is incredibly important.A close friend of mine recently used her tax return to buy new furniture for their house. Now for those savers out there who are quietly shaking their heads, hold on one moment. I actually find this kind of spending to be ideal, because it will leave a lasting impression on her home life. Whether you realize it or not, the furniture in a house is something you see and use every single day. Really sit and think about how much the average American sits on their couch per day. (Hint a lot) How long does furniture last in your house? (A long time) Buying new furniture is a great way to improve the day to day quality of life at home. Sure, for those bargain hunters out there, Craigslist is a magical place with deals at the ready. But if you want peace of mind knowing that the history of your furniture is PG rated, investing in your home life may not be such a bad idea. Buying new furniture will definitely not make you rich, but it CAN make your family wealthy in regards to their happiness.
Entrepreneurship (Invest in your ideas)
Have you ever wanted to start your own side business and start pulling in some extra cash? You could open your own studio, invest in the technology you need to get started, rent out a small place for your idea, use the money for advertisement, build a prototype, whatever you want! This tax return could be you seed money to get started, or even all the money you need to keep it running for a year! Building a side business or even full business can be one of the most rewarding and amazing experiences a person has. With this surplus you just received, you can leverage your future and really try something new with a safety net. We will be posting several articles on entrepreneurship next month, so if you are interested in taking life by the reigns and building something new, hold onto that cash for next month!
Let’s be honest, it is all too easy to spend money from our tax returns, and there are millions of ways you can spend your cash. We have highlighted a few options, but there are many more that may be right for you. I encourage you all to really think and talk with your family about what you want to do with it. If you chose to spend it, make sure it is something you will value and appreciate. If you chose to save it, great for you! The key to wealth and financial wisdom is being intentional with what you do, and knowing why you are doing it. Try to make the most of these opportunities in your life, because they will help you set up good habits that will last a lifetime.