If you have a tax refund coming your way, take a minute to read this before you spend it all on a spontaneous weekend getaway to Mexico. (Even if that does sound delightful right now…)

Spending the money on something fun might be good, but also consider putting part (or all!) of that refund toward some of these money-savvy goals. (Future You will be very happy!)

1. Pay off debt.

If you have credit card debt, knock this out ASAP so you can dump the high interest payments. Then tackle the debts with lower interest rates, like student loans!

2. Set up an emergency fund.

Do you have any money set aside for surprise expenses? Like, when your car breaks down and your dog needs emergency surgery and three students move away all in the same month you have to order plane tickets for your best friend’s wedding?

Your tax refund can help jump start an emergency fund! Start with a $1,000 goal and keep building that fund until you have 3-6 months of living expenses saved.

3. Save for retirement.

This one sounds incredibly boring, but it’s also incredibly important! I’ve written about the very achievable millionaire savings plan for music teachers.

An unexpected refund is the perfect way to open a retirement account, or to submit an extra contribution to an existing account!

4. Build a buffer in your budget.

As a self-employed music teacher (especially if you’re just starting out), your income might vary from month-to-month. We do what we can to minimize that, but sometimes it can’t be avoided.

One way of dealing with this variability is to base your monthly budget on the income you already earned in the previous month instead of on what you expect to earn this month.

This can be a hard system to implement because it requires a month’s worth of savings to get going, but a surprise influx of cash from a tax refund could be the perfect launching point!

5. Invest in your business.

Consider your studio goals for the next few years. Do you want to bring in more students? Offer new classes? Expand your studio? Work less? Pursue a passion project?

This may be the time to invest in equipment (maybe even an iPad!), instruments, training, or coaching!

6. Start saving for a house.

Home ownership isn’t for everyone, but if it’s on your goal list and you’ve been practicing other good money management habits, it might be time to start saving for a down payment!

7. Try not to get a refund next year.

Getting a refund feels really good in April, but smart money management isn’t about warm fuzzies, it’s about the numbers!

If you got a refund, that means you paid more than you owed to the government. Yes, they will pay it back, but you essentially lent that money to the government for an entire year for free. In a sense, it cost you money to lend it, because if the cash had been in a savings account, you would have earned interest on it!

If you got a substantial refund, ask your accountant to help calculate a more accurate quarterly tax payment so you can use the extra money to reach your financial goals, instead of making interest-free loans to Uncle Sam.

Did you get a refund this year? How are you putting it to work?

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