How to Use Your Tax Refund to Change Your Life

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A windfall is defined as a “piece of unexpected good fortune, typically one that involves receiving a large amount of money.” And while tax refunds typically aren’t unexpected, they’re sometimes fairly large: Last year, the average refund surpassed $3,000, according to the IRS.

Experts (including, on occasion, me) will tell you to use that money to pay down debt and boost your retirement savings, as those will net you the biggest payoff to your bottom line.

But here’s a different approach: What if you found a way to change your life and get the most happiness out of that money? It’s not just about being responsible—it’s about aligning your lifestyle with your priorities, says Stefanie O’Connell, author of “The Broke and Beautiful Life.” 

First, take the time to consider what you’re really aiming to buy: Is it more flexibility? More time? Less stress? Then, look tactically at what it would take to make them happen with the money you’ve been handed by Uncle Sam. Here are a few ways to consider using the cash coming your way.

Pay someone else to do something that stresses you out. 

“Research around money and happiness [suggests that] investing your money in ways that save you time actually helps increase and improve your overall happiness,” says Sophia Bera, founder of Gen Y Planning. Why? It can free you up to spend more time doing things you love, and less time doing things you don't.

Hiring someone to clean your house twice a month could free up time for friends, fitness classes, or even date night if you have young children, says Bera. 

Other time saving options? Drop off clothes at a wash-and-fold dry cleaner, invest in a meal ingredient delivery service like HelloFresh or Blue Apron, or have your groceries delivered via companies like Peapod or FreshDirect.

And note: If you’re hesitant to put tax refund dollars towards time-saving services, think about what an hour of your own time is worth, then compare it to the cost of hiring out. For a rough calculation, remove the last three zeroes from your annual salary and divide the remaining number by two. (For example, if you make $40,000 a year, that rate is $20 an hour.) The bigger the gap between your price and the price of hiring out, the more it makes sense to delegate.

Invest in new skills.

Looking to switch careers, boost your earning potential, or both? Investing in your own continuing education could be key for a lifetime payoff—and money from your tax refund is a great way to get started. If you’re looking to pad your resume, consider paid skill-building workshops through companies like General Assembly (design, marketing, coding, data, etc.) or Coursera (data science, computer science, business, machine learning and more). If you’re looking to switch careers altogether, you could attend one or two classes at a local college or university or complete an online or in-person certificate program (often offered by local colleges to jumpstart people looking to switch or advance in their careers).


And if you’ve ever regretted not majoring in computer science when you had the chance? Coding boot camps are offered nationwide to teach basics to those new to the industry; there are about  with an average tuition of $11,400, according to Course Report. A word of warning, though: Make sure the company’s claims check out, as there isn’t a lot of regulation for boot camps. Ask to speak to a few graduates to confirm where they’re working and what the classes taught them. You might be able to snag a discount by asking—or by going with a part-time program that takes longer to complete. And know that even after graduating from a boot camp, it can take a significant amount of self-teaching (especially in areas like data and algorithms) to pass higher-level interviews. 

Make mental health a priority.

Staying on top of mental health—whether it’s stress, anxiety, depression or something else—can get pretty pricey.

So if you’ve been putting that on the back burner, it’s likely a worthwhile use of your tax refund that could pay off throughout your life. 

 American adults experiences an anxiety disorder at some point in their lives, according to the National Institute of Mental Health (NIMH), and about  of the world’s population is estimated to suffer from depression, reports the World Health Organization (WHO). So if you’re feeling anxious, depressed, or out of sorts, you’re not alone.

The good news is, there’s plenty of help out there. Consider seeking out a therapist or other mental health professional.  can range from around $80 on up, depending on where you live, according to Thumbtack. To find out, you can use Psychology Today’s searchable local , and if your health insurance covers mental health services, you can use a tool like  to search only for therapists who accept your insurance.

Get up to speed on your physical health. 

If you’ve been meaning to prioritize your physical health—or it was one of your New Year’s resolutions—your tax refund can be your ticket to a head start. Depending on your situation, this could look like physical therapy, chiropractic care or even a gym membership. If it’s the latter, ask about discounts, and then ask again. (Many gyms can waive annual membership fees and cut monthly premiums significantly in order to reel in customers.) Plus, if you’re interested in making your tax refund go the extra mile, ask about the discount you can get for pre-paying for six months or a year in advance (it could be significant). Or, sign up for a personal trainer to hold you accountable and make sure you make the most of your investment. 

Plan for the future. 

Estate planning might not be the most exciting use for your tax refund, but it’s a vital one—especially if you have dependents. Putting together your healthcare directive, power of attorney, and will (including outlining guardianship for your children) can cost anywhere from $500 to a couple thousand dollars depending on your financial situation. There are cheaper options available online—for example, WillMaker is available for $55 at, and LegalZoom’s DIY wills start at $69—but if your financial life is more complicated, hiring an attorney can be a worthwhile investment.

Check to see if your workplace benefits include MetLaw, offered by Hyatt Legal Plans, which allows employees to pay a certain amount per paycheck (usually around $20 or $25, says Bera) for free or discounted access to a network of attorneys for everyday legal matters. If not, ask for recommendations from your financial advisor, accountant or friends with similar financial lives. You could also check your state’s State Bar Association website for accredited lawyers who practice trust and estate law—call and ask about costs, and if they bill by the hour or the project. 

With Hayden Field