Spend, Save or Invest: What Should You Do With Your Tax Refund?

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If you are receiving a tax refund from the IRS this year, what will you do with that money? Before you spend it all on a brand-new TV, consider spending it on smart choices like investments or paying off debt. Here are some great ideas. - www.theballeronabudget.com

Tax Day 2018 is officially today, and if you’ve filed your taxes and are expecting a return, you’re probably waiting with excitement for that check to come in the mail.

Most often, we wind up spending that check as soon as we receive it. Nearly every single year since I began filing as an independent, I would often get a few hundred dollars in refunds and would spend it on something super extra. Yeah, extra. Have you seen all those silly tax return memes floating around online? That was me.

One of the key steps to growing your income is by using the money that you have wisely – that means you have to make your money work for you! The most valuable tip I can offer in regards to tax refunds is that you need to make sure that this money is going towards something that will aid in the pursuit of growing your income. That makes you have 3 options: spend, save, or invest.

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There’s frivolous spending like blowing it on a home stereo system you don’t need, a new phone when your lease isn’t up yet, or a new pet when it wasn’t even on your list of plans. And then there’s smart spending. Remember the basic rule: spend it only on things that will make you more money or change your financial situation. Here are some high-priority things you can do with your tax return:

  • Pay down your debts. If you’re constantly tight on money, chances are that you’re reaching for your credit card to make ends meet. Using your tax return for a large chunk payment will alleviate the anxiety that comes with running up your credit card balance. Use this as your chance to start with a clean slate!
  • Invest in your business. If you’re self-employed, consider purchasing necessary tools, equipment or software that will aid your business (especially if you’re a blogger and need to invest in courses like The Blogger Bible!). The best part: you can use these as business expenses for next year’s tax filing!
  • New work uniforms. Before you do this, be honest with yourself and get items that are essential for work. That means non-slip shoes, black slacks, or things you wouldn’t normally wear outside of work – not those sky-high pumps you’ve been eyeing for a while and are trying to justify buying!
  • Repairs. Leaking pipes? Broken AC unit? Does your car need something fixed? Now is probably the time to get those things done.
  • Health Procedures. If you’ve been recommended by your doctor to have a procedure done to correct something that’s causing you pain or discomfort, you might want to spend your money on that. You can’t skimp on your health.



Saving is similar to healthy eating: we all know we’re supposed to eat right, but for some reason, we just don’t. Why? Because we usually don’t have a concrete goal to save towards, which makes that money more enticing to use for other purposes. Start a good habit by using your tax return towards specific savings goals and watch the wealth accumulate.

Here are some great ideas to save up for:

  • An emergency fund. Whether it’s a loss in the family, an unexpected trip to the hospital, or losing a vehicle in a car accident, it’s important to have a rainy day fund because you never know what will happen.
  • Your retirement. You might have an IRA Roth or 401k, but let’s be real: you’ll never know if and when the cost of living will rise. Remember what happened when the baby boomers ran out of money? History could repeat itself.
  • Your child’s college expenses. Whether you currently have a child or not, if you’re intending on having kids, it’s never too early to save up for their college expenses. Right now, many college students are stuck with enormous student loan debts – who knows how much more expensive college education will become in the future?
  • Any other huge planned purchases. I would avoid using your tax refund for a down payment if you don’t have the means to make monthly payments, but instead, aim to save it so any large expenses can be paid in full. Life is much more comfortable when you can pay for that brand new flatscreen TV without knowing you have to dread another monthly payment to worry about.



Many people might be hesitant when it comes to investing, but it’s one of the wisest things you can do you suddenly receive a large sum of money. After all, the idea is great: use your money to make more money.

There are a lot of easy ways that you can invest your money in that isn’t high-risk. Here are a number of ways you can invest your money as a beginner:

  • Acorns. This app has an easy-to-use interface that shows you the basics of investing using your spare change. Simply connect your bank account and all purchases are rounded up to the next dollar so that Acorn deducts the remaining cents from your purchase. Using the accumulated amount in Acorns, users can choose the appropriate risk level they are more comfortable with and invest in brands they know and love. It makes the investing process far less intimidating through familiarity and pennies.
  • Betterment. Also a mobile app, Betterment serves as a financial advisor that offers personalized advice (for free!) to keep you on track of your savings goals by calculating the amount of savings needed to reach them. Your money is then invested in a globally diversified portfolio of low-cost ETFs and lower tax rates that are extremely competitive with traditional investing.
  • An existing IRA Roth or 401k account. If you have a larger tax return, it’s a great idea to toss it into either of your accounts and continue on. You’re investing in your future!

Things to Avoid Spending Your Tax Return On

Sometimes money can be so tight that you might need to spend your tax return money on other things – that’s fine. Whatever you do, it’s important to think of your tax return as a valuable chunk of money that can do either great good or great evil. Here are some things you should definitely avoid spending your money on:

  • A spa day. It’s tempting to want to rush to the salon and get a fresh haircut and color and a gel manicure/pedicure, but after all those services add up including tip you’ll probably already be halfway through your tax return money. More than likely, you’ll wind up giving in to more frivolous spending, and bam, there goes your tax refund.
  • A down payment on something you haven’t planned for. Whether it’s for a new car, a motorcycle, a designer purse, or any other recreational or unnecessary item that needs financing, stay away – especially if it wasn’t in your original financial plan. Using your tax return on something you weren’t able to afford before getting your check only encourages irresponsible and frivolous spending habits – don’t forget the monthly financing that’s associated with high-dollar items!
  • A new pet. Seriously, I’ve seen people come home with a new puppy or kitten, and they never spoke about getting a new fur baby before! If you weren’t planning for this, then don’t get one. Having a pet is a lot of responsibility, and in many ways more than one, it’s like having a child.

How are you planning to use your tax refund? Let’s chat in the comments and don’t forget to subscribe to my newsletter below for more money-saving tips and tricks.

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If you are receiving a tax refund from the IRS this year, what will you do with that money? Before you spend it all on a brand-new TV, consider spending it on smart choices like investments or paying off debt. Here are some great ideas. - www.theballeronabudget.com


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