Even though I’ve been a full-fledged adult for more than a decade, 2016 was my first full year in my first full-time, big-girl job.
That means this spring, I’ll receive my biggest tax return ever.
I remember hearing my parents earmark their tax returns each year, usually for home renovations. One year they added a bedroom in the basement, then a sprinkler system for the lawn, a septic system update — super fun stuff.
I was always astounded by how much they were getting back.
For most of my 20s, I was either a barista or an aspiring writer. Those don’t pay well, ergo, I didn’t pay much into or receive much in return from taxes.
This year, I expect my tax refund check to be around $3,000. That’s a relatively sizable windfall.
I don’t have a septic system to overhaul, so I’ve come up with some other smart ways to use it — that will actually make me more money down the road.
Here’s what I’m thinking of doing with my tax refund…
1. Putting It into Savings
“Savings” sounds like the most boring thing to do with extra cash, but I’m pretty excited about it this year.
Before you think I’m a total nerd, let me explain why.
I use my Aspiration Summit checking account for emergency and vacation savings. Depositing my tax return will finally put my savings over the $2,500 mark, which means I’ll earn 1% interest on my full account balance. (When it dips below $2,500, the interest is 0.5% — still not bad.)
If I keep my savings above that threshold and continue to contribute my regular $400 each month from my paycheck, I’ll have $7,350 by the end of the year!
I might be able to find a savings account with a higher return, but those usually come with a fee.
Aspiration is totally free to use. Plus, this account’s debit card and free ATMs let me access the funds quickly — perfect for traveling or emergencies.
2. Paying Down Debt
With a cash infusion, I can make a substantial payment toward each of the bills maring my credit history.
I have one old tuition bill for about $4,000 and an emergency-room bill for $1,100.
A few hundred dollars toward each of those will go a long way.
Plus, it’ll let me get started on a payment plan. I still have a long way to go to improve my abysmal credit score, but this will be a huge relief.
3. Self-Publishing a Book
Don’t tell anyone, but I have a book in the works and I plan to self-publish it early this spring.
Because I’m scrappy, I can handle a lot of design, layout and technical aspects of publishing myself and avoid spending a lot of money. But it still won’t be free.
I’ll have to pay an illustrator and an editor. Instead of dipping into my checking account, I can use a bit of the cash from my tax return. I should earn the money back quickly through sales.
After that, I can put the profits back into my savings!
4. Spending It on a Side Hustle
My freelance work is usually digital and writing-based, so I have few startup costs. (Though I am easily-tempted into buying a domain whenever a new idea strikes…)
On the other hand, my partner (who shares my income — and tax return), freelances as a photographer, graphic designer, animator and audio engineer. Those all come with significant costs for equipment and software.
With our windfall, he can buy the camera lens that’s been on his wish list. I don’t know what it does, but I know it’ll help him take better portraits — which means more paid gigs.
5. Planning My Vacations for the Year
No, my tax return won’t pay for an entire year’s travel.
I’ve got places to go! But it’s a good start.
My next vacation — Puerto Rico! — isn’t until May, but I know I need to buy my flights about two months in advance to get the best price. That makes now a perfect time to start looking!
Getting that first big trip out of the way also motivates me to start planning and budgeting to travel for the rest of the year.
I’ve got trips to visit family in Wisconsin and Utah this summer, an annual vacation to New York in the fall, and holiday travel in December. That’s going to take some clever budgeting.
6. Opening an IRA
I’ve been smart enough since starting this job to contribute to my 401(k). Because The Penny Hoarder matches 4%, I contribute that much every paycheck to ensure I get that benefit.
But I know I could be doing more to save for retirement.
My next step is to open an IRA, where I can make regular contributions to save even more (and get a bigger tax break!).
I’m not interested in putting energy into managing investments, so I think I’ll go with an online advisor. Sites like Betterment and FutureAdvisor make it simple: I can start with a small amount of money, set my goals and let the app automatically invest in a safe portfolio for me.
7. Getting a Month Ahead on Rent
Before I had this job, rent was an endless headache. My silly need to sleep indoors ate away about half my income most months.
With unstable freelance income, I used to dread the first of the month. Now, I earn enough to foot the bill.
But I want to do more than keep up. I want to get ahead.
I can drop a chunk of my tax refund check to pay an extra month’s rent (or at least stash it for that purpose). That’s a simple way to keep my peace of mind, just in case times get tough again.
8. Taking a Class
I’ll be 31 this year.
While the idea of going to school at this age seems silly, I’m finally mature enough to actually enjoy what I’ll learn.
I also know it can help me earn more money.
I’ll look into writing workshops at nearby colleges and our local arts center. Maybe I’ll take an online course to learn a new skill, like Excel or Photoshop.
Never hurts to be well-rounded!
Your Turn: How will you spend your tax refund check this year?
Disclosure: What would Abe do? Probably pat us on the back for placing affiliate links in this post. Thanks for helping us fill The Penny Hoarder’s beer fridge!
Dana Sitar (@danasitar) is a senior writer at The Penny Hoarder. She’s written for Huffington Post, Entrepreneur.com, Writer’s Digest and more, attempting humor wherever it’s allowed (and sometimes where it’s not).