7 Ways to Invest Your Tax Return

1. Fund your emergency savings.

If you don’t have a very basic $1000 in savings strictly earmarked for emergencies, this needs to be your first use of your tax refund. Because life will happen. Your tires will go flat in an ice storm. Your lawn mower will die when the city is sending you nastygrams about your grass being too tall. Your pants will split in the crotch while you’re running late for your shift. Having the emergency fund in place will ensure that these remain annoyances and not devastating financial crises.

And should your tax refund not be enough to fully fund that basic emergency savings, check out my FREE Guide: How to Make $1000.

2. Invest in your health.

When’s the last time you had an annual checkup? Or an eye exam? I know, healthcare costs are absolutely obnoxious. (At least, they are in the U.S. even with insurance.) Use your tax refund to go get those basic health care needs attended to. See your dentist. Get your checkup. Talk to a nutritionist about how to improve your daily diet. By putting in effort to check on and improve your health, you are potentially saving yourself obnoxious bills when your house of health comes crashing down. Better to find out you’re pre-diabetic in an annual health exam than a full blown diabetic when you’re in surgery having an infectious mass cut out of your body. The costs on a preventative checkup are far less than a weeklong hospital stay post-op.

3. Pay down/off a debt.

Now wait, Momma. That’s not investing! Oh but it is! Let’s say you’re paying 12% interest on your student loan and you pay down the principle of the loan, you have effectively made a 12% return on your money. And by lowering the overall balance, any subsequent monthly payments will be putting more money towards the principle, as there is less base loan to be calculating the interest. Or! Say you’ve got a $500 balance on your credit card at 24%. Use your tax return to pay off the entire balance and make a 24% return on your money. (Also if you’re not paying off your credit cards in full at the end of every month, I advise you to stop using them. Interest on the balance is like flushing money down the toilet.)

4. Invest in supplies/materials/improvements to your side hustle.

What you’re looking to do is invest in your future potential earnings by investing into your side hustle. Do you need a better mic for your Twitch channel? Do you need a trailer to haul your lawn equipment? What about more fabric for your quilting hustle? By investing your tax return into your hustle, you’re looking forward to ways to grow and expand it. What’s the return? It honestly depends on both your chosen industry and your effort put into the work. 

5. Fund your Roth IRA.

I assume you are investing in your 401K with your company match. Even if you’re not, or if your employer doesn’t offer these, investing in your Roth is a great investment for your future. The younger you are, the longer your money has to grow and compound. It is essentially making money in your sleep. Yep. And with the Roth, because the money is invested post-tax, you will not pay taxes on the growth in the future. As of 2024, you can contribute up to $7000 per year, if you are under 50. If you are 50 or older, your maximum contribution is $8000. I’m not making any recommendations where to deploy that money. Do your own research or talk to your financial investment advisor.

6. Get the oil changed in your car.

How on earth is this an investment? Well how often do you put off maintenance on your car because money is tight or you forgot? Sadly if you don’t take care of the routine business like oil changes, you could be looking at a completely wasted engine. Which, by the way, is ridiculously expensive to repair. If it can be salvaged at all. So use that tax refund by investing into the longevity of your car. The small output for any routine maintenance is a tiny fraction of the money you’d outlay for a major repair.

7. Invest in yourself.

Have you been meaning to learn how to knit? Interested in learning Greek? Have no clue how to take quality photos of your woodworking projects? Go ahead and invest in yourself. Sign up for the creative writing course at your local university. Head over to Skillshare and pick up a new skill that interests you. Find an online coach with a training program that shows you how to convert your hobby into a hustle. Whatever ignites your imagination, invest in yourself. Learn those new skills. Pay for a personal instructor. You are absolutely worth the investment.