Freelancers: What to do with you tax refund?

March 25, 2015

It’s tax season again!

Are you excited? Well, you should be. If you’re anything like me, you’ve been playing with your tax software to see where you end up this year, and if there are any other deductions calling your name. TurboTax and I are best friends right now! You can check out the TurboTax’s free offerings online as well. 

This is when the rubber meets the road, and you figure out what to invest in with your tax refund.

Let me preface this by saying that your tax refund is NOT a saving plan, or investment strategy.  You shouldn’t “count” on that money. In fact, if you’ve done your account correctly, you shouldn’t be getting a ton back. But in the event that you are getting money back, there are a few things that you can do with the refund coming your way.


Nest egg:

Most freelancers know that it’s really hard to predict what your income will be any given year, so having a nest egg of 3-6 months of expenses in your bank account will give that peace of mind, and help you sleep better at night during the slow months.

This, while not the most exciting strategy, is great for you if you’re just starting out, or have gone through some of your contingency fund already.

Long-term savings:

If your fund is all set, and you still have your heart set on saving that money, then explore RRSPs, and TFSA.

Compound interest is your friend, and this will ensure that your retirement savings plan or house fund gets an extra boost.

Invest in yourself:

When was the last time you did an inventory of what your business needs to grow? I’m serious. Every freelancer needs to do this at least once a year. It’s a great way to make sure that you’re exceeding your business goals and are on track to earn more next year.

The holy grail/goal of freelancing is being able to serve a niche set of high paying clients. Think of it as the 80-20 rule where 80% of your income comes from 20% of your clients. And for the 80-20 to work you need to make sure that you’re at the top of your game.

That’s where investing in yourself comes in. This could be a course, a workshop, hiring a coach or investing in a new website. It’s tempting to indulge in everything, but this is where knowing what your specific business needs are at any given time comes in handy.

While not everything costs a ton of money,  a professional-looking business takes work.

Treat yo’self:

I know, I know! The personal finance gods are going to be very upset with that suggestion.

The truth is that while we try our best to have our financial house in order, or travel or fun-fund tends to be neglected more often that not. Most entrepreneurs and freelancers grossly underestimate that value of taking a break, and doing things that recharge our batteries.

If you’re one of the few lucky ones who ends up getting a bigger refund than expected thanks to tools like TurboTax, then maybe you should book a trip, buy that new toy that you have your eye, go to a concert, or do something kind for a loved one or even a stranger.

The point is that as long as you have your ducks in a row financially speaking, feel free to do something exciting with your refund. Or invest it, if that gets you all jazzed up!

But how much are you getting back?

Now before we get ahead of ourselves, it’s very important to make sure that you claim all the deductions that you’re eligible. This is TurboTax comes into play! You can file your taxes in as little as 30 mins.


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