My Two Cents on What You Should Do with Your Tax Refund

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Weston and I got married 2 weeks after I graduated from college. I then took a very low-paying internship with the business I worked for during college. One of my bosses was also a good friend and she immediately told me to NOT SPEND OUR NEXT TAX REFUND. She knew how much I was making, that Weston didn’t have a job yet, and so we’d probably get a pretty good refund back. She knew that as two broke, just out of college newlyweds, we’d be tempted to spend that money next year instead of saving it.
You know what? I’m glad she told me to save it. And you should, too.
Maybe you’re thinking, “But Makenzie, we have debt! We should pay it all off!”
What’s your debt look like? Is it all low-interest student loans where you are making a better return in your investments? Then put it in the investment account. If you’re pulling on average a 6% return on your investments, but your student loans are only 4%, then you’re making an extra 2% on that money in your investment account. Then, in my opinion, it’s worth continuing to pay off the student loans little by little. Since usually investment accounts are kept long-term, it’s normally best to get as much in as possible in the beginning (compounding interest, baby).
Do you have a lot of high-interest debt? Like those credit cards? Then you’re better off paying it down with your refund. But I’d first recommend making sure you have an emergency fund in place. If you don’t, put some of that refund towards the emergency fund. Then use the rest toward your high-interest debt.
But whatever you do, I urge you to not spend your tax refund on stuff! Hopefully, you’re at a point where you are saving a little each month for whatever it is you’re wanting to buy. Continue on that track. If you spend it, you’re spending it on something that will be depreciating (probably). Something you probably don’t need. Delayed gratification is the best. And this is almost like free money. Use it to help yourself in the long run.


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