Dominique Broadway outlines five ways to use a tax refund wisely: build an emergency fund, pay down high-interest debt, fund a Roth IRA, spend on meaningful experiences like travel, or invest in education and health that boost future earnings.
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Hey everybody, so quick question. What did you do with your tax refund last year? Hmm? Probably don't remember. Most people I ask like, "Hey, what did you do with your tax refund last year?" and most people are like, "I have no idea. I don't even remember what I did with it. I may have saved it. I may have paid off credit card debt." And usually their savings is empty and their credit card debt is back up. So it was kind of a waste of money, right? So I wanted to give you 5 tips of things that you can do this year so that you don't have to worry about blowing your tax refund this time. And so if I ever have to ask you that question, you have a really good, confident answer. So the first tip is to jumpstart your emergency fund. For most people, getting their emergency fund up and running is one of their biggest goals, and also to just help to make that emergency fund grow. So getting that extra $5,000, $6,000, or $3,000, however it may be, is a really great jumpstart amount so that you can start saving more and more and getting your emergency fund in place. The second tip is to start paying down debt. When you get these large chunks of change, it's, it's a great way just to kind of toss it towards your credit card, student loans, or car loan, or anything else that you feel like you really want to get down and get that financial pressure off of you. But as I said earlier, if you take the money to pay down your debt, don't go and run the credit card right back up. That's, that's a waste of time, right? There's no point in paying down the card just to run it back right back up and have the balance for the rest of the year. So make sure if you're gonna pay the debt off that you're gonna make a conscious effort and commit to you and commit to me that you're not going to just run the debt right back up. So number 3, contribute to a retirement account. When you get this lump sum of cash, this is a great time to open a Roth IRA if you don't have one or if you're wanting to want one, you're wanting to get one. You can contribute up to $5,500 a year into your Roth IRA, so this would be a great time to dump the money in there. They're awesome. Anything that you put in, you can take out tax-free. You can use the money for your first home purchase and a lot of other cool purchases, um, tax-free, which is great, right? So the third— fourth tip is to actually take a trip. And I'm the kind of person, I think life is all about experiences. I would much rather use my money for a trip to Dubai or somewhere really cool instead of just buying a bunch of clothes that are going to sit in my closet. Right? Although I really love clothes. But if you use your tax refund to help create experiences or memories, and I asked you a year from now, hey, what did you do with your trip? You say, oh Dominique, I went to Greece, or I went to Miami, or I went to Vegas, and I had such an amazing time. And at least you're able to use that money to create experiences. And last but not least, invest in yourself. One of the best things you can invest in really is yourself. And all the time people ask me like, what are some great investment options or great things to invest in? A lot of times investing in yourself is one of the best things you can do. And by investing in yourself, this can be helping you get, you know, hiring a personal trainer, a financial planner, a personal finance coach, you know, going back to school, learning that thing that you wanted to learn so that maybe you can earn more money or give yourself more time to do things that you enjoy. Or even just to be able to help you to reach any of your professional or personal or just life goals. And so those are just a couple things I think that you can do this year so that you can avoid completely blowing your tax refund. And when I ask you next year, so-and-so, fill in your name there, what did you do with your tax refund? You can say, Dominique, I am— I can confidently say that I paid down my debt and I didn't— let's let the debt creep back up, or I started my emergency fund and it was perfect timing because I had an emergency, or whatever it may be, or I invested in myself and took that photography class and now I'm able to bring in an extra $1,000 a month from doing photography on the side. So hopefully these tips helped you. Obviously, if you have any other questions, www.dominiquebroadway.com, Instagram @DominiqueBroadway, Twitter @MsFinanceCoach. I'll see you around.
