What to Do With Your Tax Return Money: 6 Ideas for Maximum Profit
Tax season is officially here, which means the prices of treat-yourself items are on the rise. Let’s chat about what to do with your tax return money for maximum profit and peace. Let’s do this.
Peace & profit
When you are thinking about profit, you have to talk about peace, and that means peace of mind. You can’t have one without the other.
We all know people who’ve made money and hit their massive income goals. They don’t have relationships or any of those things. If you make all the money and don’t have peace with your money, it’s not going to be this transformational experience.
This is exactly why, statistically, lottery winners go broke within five years. They lose all the money and then some, because of a mindset.
As far as what to do with your tax return money, let’s talk about what would give you peace of mind.
Financial security
Financial security is one thing that gives you peace of mind. And this is different for 2023. Several gurus still talk about putting six months' worth of expenses into a savings account.
That doesn’t work anymore. Please don’t be doing that. We still do need to have three months of security at a minimum – I would still agree with that.
But, if you want to maximize profit and peace, the smart move for your tax return would be to make sure you got some of that financial security. Here are a couple of things that would play into that.
1. Pay your bills
If you’ve got bills that you’re behind on, please just catch up on those, first. Put that out of the way. It’s also going to give you peace of mind because you’re not getting red letters anymore.
2. Add to savings
Another way you could be increasing your financial security is you could be adding to savings accounts, like your contingency fund.
You could also be setting aside money for Christmas and other holidays so that you can pay cash. But, if something happens, and the stuff hits the fan, you’ve also got money to cover your necessities. That’s part of your financial security.
3. Pay annual rates
You could also pay memberships at an annual rate to save money and lower your monthly expenses. That would be another great thing to do.
4. Pay off debt
We talk all the time about focusing on your net worth, instead of your debt payoff. That is still true, but it’s a good idea to pay off consumer debt. Your tax return or any other time you get a lump sum of money is a great time to focus on that and make smart moves.
So, a couple of things you want to evaluate: What is the total amount that’s due? Write them down. In the academy, we talk about the different options for paying off debt.
Debt snowball
For most people, I recommend the debt snowball, which means your rank debts up in order from smallest to largest and pay off the smallest one first, and then roll it up into the larger ones.
Debt avalanche
The debt avalanche is basically based on interest. You pay off the highest-interest debt first. The reason why the debt snowball works is that the mindset thing helps you gain momentum, and that’s more important than the little bit of money on interest. I want you to stick with it long-term.
So, evaluate the total amount that’s due. Evaluate the interest. And, then evaluate the emotions around the debt. Is this a debt that you feel guilt or shame about? That would be one that I would prioritize over one that doesn’t bother you.
Can you settle? It does not hurt to ask. Most credit card companies will close the account if you settle. Keep in mind that it will affect your credit score, credit availability, and all those things. But, with debts like medical debts, absolutely settle.
We do need to strive to keep a decent credit score. It’s not the be-all and end-all, but if we don’t pay attention to it, it can cause some serious issues, so that is something to factor in.
Once you’ve evaluated the total amount due, interest, and emotions, and can you settle, you can create a game plan for the maximum reward for your money.
5. Invest in business
We’ve talked about how paying off debt is a smart move for profit. Another good idea is investing in tools for your business. There are many different ways you can accelerate profit in your business investments.
6. Do something for you
A smart thing to do with your tax return money is to do something for yourself. This might not seem like it’s about maximizing profit, but we’re not talking about something crazy or big.
Just because you get a lump sum from your tax return, doesn’t mean you need to blow everything on yourself.
But, this shirt is something I bought for myself recently. We don’t always necessarily buy stuff for ourselves as moms. This is something I did for myself that didn’t cost a lot. I think it’s a $20 shirt from Amazon, but confidence in it — that’s key.
That’s why doing something for yourself can increase your profit. I like the red color, but the red was a little more expensive. I could have let guilt come up, and gotten the black one, but I wanted a fun, nicer shirt. That’s powerful. I want you to be able to do that for yourself as well.
What to do with your tax return money
To recap the strategies for maximizing profit and what to do with your tax return, we talked about catching up on bills, adding to savings accounts, paying memberships and subscriptions at annual rates, debt payoff, investing in your business, and doing something for yourself.
I want to hear which strategy was the most insightful for you. Drop a comment and let me know.
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So many people think they're buying on sale with a credit card. Then they pay interest on the balance. Doesn't make sense. By the time you've paid off the debt, you've paid full price or more for whatever you bought. Any interest affects cash flow and cost of anything you buy.