If you’re among the lucky, you’ll soon be seeing a sizable chunk of change in the form of a tax refund (last year’s national average was $2,800). Before you blow it all on Kylie Jenner lip kits, we suggest you consider dividing your windfall among responsible, adult-like expenses and more frivolous purchases. Some experts recommend a 90/10 split, with 90% of your refund going toward the practical and just 10% to the fun stuff, but we won’t judge if you skew a teensy bit more toward the indulgent. Here, our suggestions for how to spend your refund in the least regrettable (and potentially most unforgettable) ways.
Responsible: Pay Off Your Debt
We know this doesn't sound like an enjoyable way to spend your hard-earned cash, but paying off debt will provide something priceless: peace of mind. Debts carrying the highest interest rates should be paid down first, and we suggest you start with outstanding credit card balances. If you're considering investing the cash instead, think twice; you'll have to earn somewhere between 15 and 20% (an unlikely return) for the investment to be worth hanging onto the debt.
Indulgent: Get Out Of Town
Research has shown that experiences bring more joy than possessions, so if you're going to spend part of your refund on something technically impractical, we suggest you start with a getaway. (Need inspiration? Check out our grown-up spring-break destinations.) If you can't swing a full-blown vacay on the percentage of your refund that you've set aside for fun, consider a weekend trip, or even a day trip.
Responsible: Build An Emergency Fund
We can't stress enough how important it is to have a safety net. Experts suggest squirreling away six to nine months' worth of expenses, but that's a pretty unrealistic number for underpaid/underemployed millennials. Aim instead to put away whatever you can, whether it's the full refund amount or just a small percentage. It may feel less than exciting but you'll be grateful you did so if you find yourself needing to replace an expensive car part, or if you suddenly lose your job or encounter unforeseen medical expenses. Keep the money in a savings account.
Indulgent: Set Aside A Spa Allowance
Let's say you receive last year's average refund amount of $2,800, which amounts to around $233 per month over a year. That's plenty to budget a monthly massage, facial or other self-care service into your expenses. Here are some of our favorite spas across the US, as well as a list of the best services they offer. You can also set this up as a "fun money" account, and you'll find yourself with an extra $200 a month to play with.
Responsible: See The Doc
We're not talking about the one with "plastic" in his title, though if his or her office is where you find your bliss, we're all for it. We specifically recommend you put some portion of your refund toward any sort of medical, dental or psychological appointment you've been avoiding due to a lack of funds. This can include anything from (super-sexy) mole removal to a root canal to those therapy sessions your friends have been hinting you should look into to help you get over your ex.
Indulgent: Add To Your Art Collection
If you're not wanting to spend your refund on something totally grown-up, but don't want to blow it like a college kid either, art is a great compromise. It's an investment that isn't a total buzzkill. Here's a starter list of some sites we love for artwork at various price points: SaatchiArt, Artspace, Artstar, CitizenAtelier and 20x200. For bigger investment pieces, check out the Sotheby's auction site on eBay.
Responsible: Make More Money
One great way to invest your tax refund is to add it to your workplace 401(k) to gain your employer's match amount, as this is definitely money you should not be missing out on. (A bit more guidance on your 401(k) strategy here.) If you're feeling adventurous in terms of investing but don't want to pay the fees associated with engaging a trader, you can try dipping your toe into the pool via this Jared Leto–backed RobinHood app. Note: The investment option should be exercised only if you've already managed to pay off your debts and build your emergency fund, in which case you are a 2016 unicorn and we salute you.
Indulgent: Buy Yourself Some Bling
Somehow, nothing feels quite as indulgent as buying yourself a beautiful piece of jewelry, which is why we highly recommend using at least some portion of your tax refund to do so. Don't skimp on this one; if you're going to use your tax windfall to treat yourself to something shiny, be sure it's a high-quality piece you're not going to have to throw away in a couple of months. If you're in need of a little inspiration, try this list of the accessories every woman in her 30s should own.
Responsible: Donate To Charity
According to Forbes, charity is something only the wealthy should engage in; however, we see nothing wrong with upping your 2016 karma by investing some portion of your refund in others. Use Charity Navigator to help you determine which cause may be worth donating to, or consider using the money to help out a friend, family member or colleague. How lovely to surprise your law student brother with a month's credit card payment or a bestie with a contribution to her creative endeavor du jour.
Indulgent: Grab A Bag
We personally believe you will never, ever regret spending your hard-earned cash on an investment bag (unless, of course, you manage to spill red wine all over it two days after purchasing). If you've been eyeing an It bag, we can think of no better way to use your refund indulgently while still technically making a smart investment.