What to do with Your Tax Return - Fun and Responsible Ideas for Your Tax Refund

Tax time!
Tax time! | Source

Should you spend your tax refund for fun?

So you're getting a tax refund this year. What do you do with it? Do you use it "responsibly" or do you use it for "fun"? First, even in that context, it depends what your definition of "fun" is. Being frugally minded, my idea of fun may differ from someone else's. I can have fun sitting at home sipping coffee while typing away on my laptop, just as I am now. I have fun walking my dog around the neighborhood, watching him stop to sniff flowers and dog poop. I can have fun with simple, cheap pleasures, so fun to me doesn't have to cost a lot of money.

Along those lines, fun to me is also paying off my debts, including my mortgage. I'm working hard to pay off my mortgage early. To me, not owing anybody anything would be major fun! I personally couldn't spend a tax refund of several thousand dollars on a vacation, new furniture, or new clothes and jewelry when I have a mortgage still hanging over me.

But that's me. Many people say to live in the moment. Life's too short. Yes, life is too short, and if I really wanted to use that tax money for a vacation, then I could. But I don't want to. Life is also too short to live it in debt. My financial freedom is very important to me. With that said, perhaps you're tired of reading this article. You want to spend your tax return money on the traditional idea of fun. If you're willing to consider more frugal "fun" ideas, then I'm here to give you some suggestions.

Use Form 1040 if you itemize deductions.
Use Form 1040 if you itemize deductions. | Source

"Fun" things to do with your tax refund

Okay, maybe not all of the suggestions I'm going to give you are fun, but to me they are, as they improve your current and future living situations. Here are ideas:

LESS FUN IDEAS:

1) Pay off your credit cards.

You've probably heard it before. The interest on your credit cards is killing you financially. You are probably paying about 20% just in interest? Why are you doing that? You will never have any money if you keep that up.

2) Apply your refund to your mortgage principal.

The mortgage interest you save will be significant and get you that much closer to paying off your mortgage. It IS possible to pay off your mortgage in this lifetime. Can you imagine what kind of financial freedom that would give you? Look at your amortization schedule. If you don't have one, get a copy from your mortgage company. Look on your statement or online at what your current balance is and what it will be after just one payment. Now, take the amount of your refund and subtract on your amortization schedule to see how many months ahead you get by applying your refund to the principal. You will probably get ahead several--or many--months of mortgage payments, which means you are getting that many months ahead on your payment schedule and saving that much interest for each of those months.

3) Put the money into a savings account.

If you have no savings, put your tax refund in the bank and let it set. You need an emergency fund for unexpected expenses such as car or home repairs. You will be glad that you have it when an emergency happens.

4) Invest for retirement.

You don't usually have money to invest or save for retirement? Now you do. Deposit the money into your employer or other IRA if you have one. If you don't, open one. Consider a Roth IRA if you think you may need the money at some point before retirement. With a Roth IRA, you can take out the money deposited (not the money earned) without penalty.


Skylight Improvement in Kitchen

Skylights on a rainy day. On a sunny day, the whole kitchen is unbelievably bright with natural light!
Skylights on a rainy day. On a sunny day, the whole kitchen is unbelievably bright with natural light! | Source

Things that are a little more fun?

MORE FUN IDEAS:

1) Pay off your car.

Pay off your car or at least get close. Yes, this IS fun because you know that a car payment is a pain.

2) Do a home improvement task.

Now we're getting more fun, aren't we? Is there a room that needs remodeled or a floor that needs to be redone? I recently had tube sky lights put into my kitchen to brighten it up. Now, I have natural light coming into the kitchen, and I don't have to flip on the light switches during the daytime. I also had my handyman redo the concrete flooring on my screened-in patio with a heavy duty colored paint that's attractive, but, more importantly, resistant to weather and cat nails! It's easier to clean and is holding up against my pack of felines.

3) Have a backyard makeover.

More fun, still, perhaps. Pay a landscaper to makeover your back yard. Create your own little haven. Instead of an expensive vacation, retreat to your backyard, something you can enjoy all year long.

The gift that keeps on giving...

If you spend your tax refund money on paying credit cards, mortgage or car payments, you will save money in the long run from the interest you won't have to pay. When you make an improvement to your home or land, you are increasing the resale value of your property, should you ever sell it. In the meantime, you are improving your surroundings for the majority of the year, instead of just a week or two of vacation. Using your tax refund money on practical things such as I've suggested (that are also kind of fun, in my perspective) will not only help you presently but also on down the line. Consider it!

More Tax Refund Tips

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#22/30 | Source

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Comments 44 comments

Just Ask Susan profile image

Just Ask Susan 4 years ago from Ontario, Canada

Excellent ways to use a tax refund, especially applying it to your mortgage.

Up +++ and sharing.


Moms-Secret profile image

Moms-Secret 4 years ago from Central Florida

I love the skylights. It has been on my list for a while. You are after my own heart Vicky. I just wrote a energy savings hub that these sky lights would fit right into.

Taxes...also on my to do list...I know I'm procrastinating... sigh :D

Great hub... votes for you...


Kristine Manley profile image

Kristine Manley 4 years ago from Atlanta, GA

Great Ideas. I paid off a credit card, and it felt so good. Voted up!


melodylewis80 profile image

melodylewis80 4 years ago from Texas

We have always paid down debt or put it into our ever growing emergency fund.


Victoria Lynn profile image

Victoria Lynn 4 years ago from Arkansas, USA Author

Thanks,Susan. I agree about the mortgage. I'm doing everything I can do pay that thing down! Thanks for the vote and sharing!


suzzycue profile image

suzzycue 4 years ago from Ontario, Canada

Great hub. I'm with you all the way, I'm very frugal myself and I'm going to pay off my visa with mine so I can have more freedom down the road.


Victoria Lynn profile image

Victoria Lynn 4 years ago from Arkansas, USA Author

Moms--I love the skylights. I used to have to turn on the lights all the time in my dark kitchen. They were a great investment. Not too expensive either. Do your taxes! Thanks for reading!


Victoria Lynn profile image

Victoria Lynn 4 years ago from Arkansas, USA Author

Awesome, Kristine, for paying off that credit card. Way to go!


Victoria Lynn profile image

Victoria Lynn 4 years ago from Arkansas, USA Author

Way to go, melody! Good for you guys!


Ardie profile image

Ardie 4 years ago from Neverland

Hm, I like fun but I am responsible by nature - booooo. Being married and having three kids lets us (the husband and I) get a decent tax refund at the end of the year. Last year's paid off out truck so we dont have any car payments and this year's paid off the last of my student loans. I say next year we take the income tax return and do something fun - like visit Alaska!! :D


billybuc profile image

billybuc 4 years ago from Olympia, WA

Oh if I were only going to get a refund! Wouldn't that be lovely? Great ideas for those who are going to get that check in the mail. I'll just sit here and be envious. :) Good job Vicki!


Millionaire Tips profile image

Millionaire Tips 4 years ago from USA

These are terrific ideas for how to spend your refund, and I have been following them diligently throughout my working life. My mortgage and car is paid off. This year, I applied my refund to my IRA. The additional deduction meant that I could put even more in the IRA! I guess if you felt like you deserved a splurge, you could spend a hundred dollars or so for splurging, and then put the rest towards more financially correct stuff.


Victoria Lynn profile image

Victoria Lynn 4 years ago from Arkansas, USA Author

Good for you, suzzycue! and I really like your name, too!


emilybee profile image

emilybee 4 years ago

Paying down that good ol' credit card....I feel like every tax refund time I make it a point to pay mine down, and it's still in existence :/ Great hub for good things to do with tax refunds.


Rosemay50 profile image

Rosemay50 4 years ago from Hawkes Bay - NewZealand

Great ideas and very good advice.

My last refund I paid off my credit card and then I cut it up. I owe my lawyer some still but other than that it feels good to be able to say I don't owe anyone a cent.

Oh that feels so good

A great job well done Victoria


RealHousewife profile image

RealHousewife 4 years ago from St. Louis, MO

Awww shucks....I never get a REFUND! Wah! I always pay in all year and I somehow never paid enough. Blood suckers. I just wanted to dream a little and see what everyone else does with their refund:)

All great ideas and I'd for sure pick an investment! Way up!


Victoria Lynn profile image

Victoria Lynn 4 years ago from Arkansas, USA Author

Alaska, Ardie? Hey, more power to ya! Maybe next year is your fun year, girl! You deserve it!


Victoria Lynn profile image

Victoria Lynn 4 years ago from Arkansas, USA Author

Bill--I got a refund! Yea! Go ahead, be envious! Thanks! --V


Victoria Lynn profile image

Victoria Lynn 4 years ago from Arkansas, USA Author

Millionaire--Yes, a nice splurge might be okay. Gosh, I want my mortgage paid off! I'm going to keep working on it! Way to go, MT!


Victoria Lynn profile image

Victoria Lynn 4 years ago from Arkansas, USA Author

emilybee-When you get that credit card paid off, don't use it again! At least don't let it build up to where you can't pay it off every month. Then you can spend your refund on ways to get ahead. Thanks for the input!


rebeccamealey profile image

rebeccamealey 4 years ago from Northeastern Georgia, USA

Great reminders for this time of year. Thanks for these tax money tips!


Victoria Lynn profile image

Victoria Lynn 4 years ago from Arkansas, USA Author

I agree, Rosemay. Not owing anybody money feels better than any splurge! Thanks for the comments!


Rolly A Chabot profile image

Rolly A Chabot 4 years ago from Alberta Canada

The past several years I have managed to get a substantial return and have simply reinvested back into what is called a Tax Free investment we have here in Canada. It has been a great investment. Thinking maybe it is high time I use it for some play time like travel to an isolated place.

Hugs from Canada


Victoria Lynn profile image

Victoria Lynn 4 years ago from Arkansas, USA Author

REALH--You are so funny! Blood suckers--haha! Thanks for the "way up!"


Victoria Lynn profile image

Victoria Lynn 4 years ago from Arkansas, USA Author

You're welcome, rebecca! Glad you liked the tax tips!


Victoria Lynn profile image

Victoria Lynn 4 years ago from Arkansas, USA Author

Rolly, that's great that you've been doing that. Maybe it is time to reward yourself with some travel, as you say. I have several friends from Canada. Nice to meet you!


Cardisa profile image

Cardisa 4 years ago from Jamaica

I don't get tax returns but I supposed I would take a well needed overdue vacation. That would be an investment for me because that would relax me enough to writer more and make some more money..lol


Victoria Lynn profile image

Victoria Lynn 4 years ago from Arkansas, USA Author

That's a good way to think about it, Cardisa. What a rationale!:-)


cclitgirl profile image

cclitgirl 4 years ago from Western NC

Once again, great minds think alike. You've nailed it again!! Being frugal, Spanish, grammar, art, culture...hmmm...I'm noticing an eerie connection here. Though, you being the "sister" on HP longer with a higher score, yes, well, I look up to you. ;)


Victoria Lynn profile image

Victoria Lynn 4 years ago from Arkansas, USA Author

CC--Yes, we do, don't we! All those things in common. Very eerie. I'd better talk to my dad about this....haha. I look up to you, too, girl. You are awesome, really. Thanks for your great comments, girl!


bankscottage profile image

bankscottage 4 years ago from Pennsylvania

Great Hub. Voted up and useful.

I have decided that not interest is good and I am working to pay off my mortgage (charge cards and other loans gone). I don't see how anyone can retire with debt, even a mortgage.

You can remove the temptation to spend your refund by having it direct deposited into your checking, savings, or IRA account. In fact, you can use Form 8888 to split your refund into up to 3 accounts. You can check it out in my hub (http://bankscottage.hubpages.com/hub/Can-I-Split-M...


Victoria Lynn profile image

Victoria Lynn 4 years ago from Arkansas, USA Author

bankscottage--I did have my refund direct deposited into my savings account. I will use some of it on my mortgage principal. Thanks for the great comments and input!


Vellur profile image

Vellur 4 years ago from Dubai

Wisdom with words. Very good advice and excellent tips. Voted up.


Victoria Lynn profile image

Victoria Lynn 4 years ago from Arkansas, USA Author

Thanks so much, Vellur!


Mary Stuart profile image

Mary Stuart 4 years ago from Washington

I put mine in my savings account. It felt good to see it go up a bit. It felt even better to not owe anything more for 2011!


Victoria Lynn profile image

Victoria Lynn 4 years ago from Arkansas, USA Author

Awesome, Mary! Such a good feeling!


Jeannieinabottle profile image

Jeannieinabottle 4 years ago from Baltimore, MD

These are great suggestions for spending your tax refund. I usually like to save some of it, but spend a little on something fun like clothes. :-) Great hub and voted up!


Victoria Lynn profile image

Victoria Lynn 4 years ago from Arkansas, USA Author

Thanks, Jeannie, for reading and commenting on this hub. I usually save it, but I sometimes spend some of it on a home improvement project. Thanks for the votes!


Sharkye11 profile image

Sharkye11 3 years ago from Oklahoma

Great hub! You sound alot like me...I consider paying off a debt more fun than the idea of a vacation! When I spend for "fun" it is on practical items for the house of for the person, and I try to bargain shop the purchase to death. And if possible, I DIY anything that would have cost any money! But that IS fun! Sharing and voting!


Victoria Lynn profile image

Victoria Lynn 3 years ago from Arkansas, USA Author

Sharkye--Yes, you totally get it! That's how I feel, too! Fun to pay off debt, fun to do home improvements. Thanks for the input!


cclitgirl profile image

cclitgirl 3 years ago from Western NC

Ugh...I'm reading this and I STILL have to do my taxes. I very often wait until the last minute. I usually get refunds, but man...it just kills me to do them...dry stuff. But your ideas here are wonderful: it's a great idea to pay down debts and such. :)


emilybee profile image

emilybee 3 years ago

It seems every year I use my tax refund to pay down my credit card, it's slowly making progress just feels like forever. Being responsible now makes things easier later on. Once the debt has lessened than someday I can use my tax refund on shoes ;)


Victoria Lynn profile image

Victoria Lynn 3 years ago from Arkansas, USA Author

CC--Finally finished today, sealing the deal with the meeting with the accountant! I had a lot to get together this year--and with freelancing, I owe a bit on taxes. I'm used to refunds, too, so it's a bummer, but that's okay. I LOVE paying down my mortgage, but this year's tax return won't help. :-( Best of luck with yours!


Victoria Lynn profile image

Victoria Lynn 3 years ago from Arkansas, USA Author

Yeah, emilybee--Pay off that credit card and never get behind again. Don't carry a balance on that thing. You've got shoes to buy. LOL. That was funny. :-)

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