Paying off credit card debt and depositing this year’s tax return (if you’re lucky enough to get one) into a Roth IRA or 401k plan likely top the “how to make the best use of your tax return” list of most self-employed individuals and small-business owners. But if you’re like me, you do wonder if those are the only smart investments to make with a tax windfall.
Here are my personal suggestions on how to spend that return, which should put you in the right physical and mental condition to tackle all your business challenges for the remainder of the year.
Click to read more about the No. 1 thing Americans do with their tax refund.
Get Happier by Outsourcing, Delegating or Hiring
Let me guess, you’re pressed for, running short of and lacking time. Like me, you don’t have enough hours in the day — and frankly, it is making you miserable. Guess what? With that tax return, you can reverse the situation. By buying yourself more of what you lack and value the most (time), you can actually increase what you’re seeking more of in your daily life (happiness). I’ll admit it, I do experience a little relief in paying off my outstanding monthly balance on a credit card, but it’s not a whole lot of lasting joy.
Now, I’m not suggesting frivolous spending intended to upset your accountant; buying yourself time is real and so is the happiness that comes with it. There is real research to back it up — a 2017 study conducted across four countries (U.S., Canada, Denmark and the Netherlands) found that spending money on time-saving services (versus material goods) is linked to less end-of-day pressure and greater life satisfaction. A smaller pilot study at Stanford University in which doctors were rewarded with vouchers for time-saving services also found similar results: Respondents reported better work-life balance and retention rates improved.
Hire someone to run those routine errands for you or outsource routine marketing and administrative tasks to a professional freelancer. I did this via the marketplace platform CloudPeeps, and it’s been extremely beneficial. Whatever you choose to do, freeing up time is sure to make you happier.
Get Healthier by Maximizing Charitable Contributions
The spillover effect from contributing to your favorite charity with this year’s tax refund might be a lot greater than simply a line item deduction from next year’s taxable income. It now appears that just as charitable contributions are responsive to tax subsidies, so is our health.
In a paper originally published in 2013 titled “Does giving to charity lead to better health? Evidence from tax subsidies for charitable giving” written by Baris K. Yörük, an associate economics professor with the University at Albany, State University of New York, two previously uncorrelated ideas were examined: boosting donations through tax deductions and the health benefits of charitable acts. After examining data from 2001, 2003, 2005 and 2007, household surveys conducted by the Center on Philanthropy Panel Study on levels of charitable giving and overall health status, Yörük’s conclusion was that tax breaks for giving could improve the nation’s overall health. Specifically, Yörük found that “tax subsidies for charitable giving have positive spillover effects on overall health status and decreases the probability of suffering from several important health problems” (namely, lung disease, arthritis and emotional and psychological problems).
Now write a check to your favorite charity, or if you have multiple causes, consider setting up a donor-advised fund as I did, and enjoy the indirect health benefits from making that charitable contribution.
Click here to read more about surprisingly easy ways to be responsible with your tax refund.