Five Rich Dad Ways To Spend Your Tax Return
Increase your financial IQ while others are saving or splurging
With this year’s tax deadline looming, the conversation around the water cooler is predictable. People are either celebrating or complaining about their tax return.
According to CNN Money in 2015, “Nearly 8 out of 10 US taxpayers get refunds.” The average amount returned? $2,800.
While it can seem like a pleasant windfall to get a return, the reality is it’s not the best thing. Essentially, getting a refund from the IRS means they got a free loan from you. That $2,800 or whatever you get back is your money—money that you overpaid to the government. It’s money they got to use all year, and money you didn’t.
That being said, a tax refund is a bigger chunk of cash than the average person will have on hand to spend at a given time during the year. So, there’s a lot of thought and discussion that goes into how to spend it.
According to a survey by Bankrate.com, Americans plan to spend their tax refund in the following ways:
- 6% on a splurge like a vacation
- 34% plan to save and invest
- 29% will pay for necessities like food and bills
- 27% are paying down debt
Here are five Rich Dad ways to spend your tax refund this year. The good news is that given the average tax return, you can probably mix and match a number of these. They’re designed to further your financial education and push you on the path to get out of the Rat Race and get richer.
Buy financial education books
I’ve always felt that a dollar spent on a good book is never a dollar poorly spent (unless you never read the book). Personally, I read a number of books each month, all focused on further my financial education. I’ll read books on how money works, investing books, and book on history so I can understand the patterns that are happening today in relation to the past.
Since it’s tax season, one book you might want to invest in is Rich Dad Advisor Tom Wheelwright’s book, “Tax-Free Wealth”. In this essential book, Tom will show you how to legally pay less in taxes and keep more money in your pockets. He digs into the complex tax code to show you why the government actually wants you to pay less in taxes (or sometimes nothing) and how you can use that to your advantage to get rich.
Subscribe to financial publications
If you want to be rich, it’s important to understand what is happening in the world today in regards to money and business. While books are important for setting the foundation for the principles you need to understand about how money works, the news cycle is the place where you see those principles in action and best learn how to put them to work for you.
Each morning I get up a read a number of papers, magazines, and newsletters to keep myself informed about what is happening in the world. You should too.
I suggest you get a subscription to “The Wall Street Journal,” “The Economist,” “Bloomberg Businessweek,” and any publication dedicated to the asset classes that you’re most interested in either learning more about or actively ready to get started in.
Hire a personal or financial coach
Have some big dreams or plans that you haven’t found a way to act on yet? Made a New Year’s resolution that you simply have kicked down the curb? You need a coach.
Just like in sports, a coach exists to motivate you, point out where you’re short-chasing yourself and others, and give you a winning game plan to execute. The richest people I know all invest in personal and financial coaches—myself included.
A good coach will give you much needed open and honest feedback, hold you accountable to your goals, and encourage you when you need it most.
Attend a training seminar
There’s nothing quite like learning in person from experts and meeting like-minded individuals who share a passion for personal growth. And the only place you can really do that is a live seminar focused on intensive training around money and investing.
There are many choices out there for these types of seminars. What you should look for is that they are lead by experts who actually do what they are teaching—not just talk about it. Also, make sure you have the proper foundation of knowledge before registering. You might be able to supplement with free or smaller-cost resources before jumping into a bigger purchase like this.
The best thing about seminars is that they allow you to take a break from your day-to-day. They’re a bit like entering into a different world—one where you can dream bigger and think deeper. You make new friends, gain new skills, and come out with more energy than you’ve had in a long time. They’re a worthy investment when you’re ready for them.
The key to making them worth the cost? Putting the things you’ve learned and the relationships you’ve made to work. Nothing is sadder than spending money on a seminar just to go back to the way you were living before.
Pay down bad debt
While it’s common for many people to say they want to pay down debt with their tax return, they don’t separate good debt from bad debt.
In short, bad debt is debt that takes money out of your pocket each month. For instance, a credit card used for purchases like a TV or clothes is bad debt. However, if it was used to purchase an investment and you make more from that investment than you have to spend in credit card payments, that is good debt. It is putting money in your pocket.
My guess is that most people mean bad debt when they say they will use their tax return to pay down debt, and that’s actually a very good thing. If you have bad debt that needs to be eliminated, then by all means do so. Then, use the savings you get in cash flow to invest in your financial education with some of the things mentioned in this article.
P.S. - Get the 20th Anniversary Edition of “Rich Dad Poor Dad”
And while you’re at it, feel free to pick up a copy of my 20th Anniversary Edition of “Rich Dad Poor Dad”. It’s completely updated for today’s world, including 9 brand new study sections to help you put the financial lessons contained to work. 35 million copies of this book have been sold over the last 20 years with endorsements from people like President Donald Trump, Will Smith, and Glenn Beck.