Even though your tax refund may be smaller this year, it’s still really tempting to splurge with that money. We’ve got 5 ideas that keep the “fun” in your refund while letting you be responsible and strategic with your money.
The key to fun-sponsible is using a small portion—say 10%—for fun. Then use the rest to get ahead on one of your financial goals. According to the IRS at the beginning of February 2019, the average refund was $1,865. The “fun” portion of that could be about $186. The other 90%—$1,679—can be your responsible money.
But this isn’t just fun plus responsible. The strategy works best when both parts are connected, so here are your 5 fun-sponsible ways you can use your tax refund.
1. Have a date night/debt night.
Fun: How long has it been since you and the significant other had a date night? Use your fun money to hit the town. The size of your refund can dictate what you do. Small refund may mean food truck and stream a movie. Bigger refund can mean you hit that new Middle Eastern place and see what’s playing at the theater.
Responsible: When date night’s over, get online and use your bank’s bill-pay function to tackle some debt. Regardless of how much you got back, focus on paying down your higher interest debt, rather than spreading it around. Maybe that’s credit cards. Maybe it’s student loans. Either way, you’ll be taking a chunk out of it to give yourself some financial breathing room.
2. Prep for a rainy day.
Fun: You know what they say about April showers. By the time Tax Day (April 15) rolls around, Spring will have sprung and all those great new raincoats will probably be on sale. Use your fun money to pick up a brand-new waterproof jacket. If your refund was already “fun-sized” this year, maybe a new umbrella is your thing.
Responsible: Many financial experts agree that you should have an emergency fund to help pay for unexpected expenses. Three to 6 months of regular expenses is a great target. You can use your responsible refund money to build up your emergency fund.
3. Treat yourself!
Fun: Take a class or learn a new skill. Want to get a grip on calligraphy? Maybe a knitting class to stitch together your Etsy dream? Or a vegetarian cooking class to heat up those culinary skills? Your town probably has a variety of options at every price range.
Responsible: While you’re investing in yourself, don’t forget about Future You. You can use the rest of your tax refund to contribute to your retirement plan or even contribute toward a traditional IRA or a Roth IRA. Your traditional IRA contribution may even be able to lower your 2019 taxable income. By the time you retire, that $1,865 could turn into an extra $10,000 in your IRA.1
Bonus responsible item: You could also invest in the next generation too. If you’ve got kids, you could start or contribute to a 529 plan to help with their future college expenses.
4. Cover your bases.
Fun: Springtime means the start of baseball season. What better way to use your re-FUN-d than by heading to the ballpark? With hundreds of major and minor league teams in the United States, and even more college and local teams, there are plenty of options if you’re up for some baseball.
Responsible: Help take care of those you love by using your refund to fill in any insurance gaps you might have.
5. Do good.
Fun-sponsible all in one: Take your “night out” to the next level and help a good cause by attending a charity event. You can combine an elegant night out with helping others. So, bid on that bit of movie memorabilia at a charity auction. Or get your gang together for a fundraising gala. Have fun and help a worthwhile cause.
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