Conventional wisdom says to use your tax return to pay off debt or add to your savings, but psychologists say it’s also acceptable to use a tax return to invest in your own happiness.
“When people get a tax return, it’s seen as a bonus and it can feel like an even bigger bonus when people decide to invest it in themselves,” says Maya Weir, clinical psychologist and founder at Thriving California, a private practice in Napa, Calif.
Don’t limit your thinking about money to just saving and investing, says Annie Cole, EdD, founder and money coach at Money Essentials for Women in Vancouver, Wash. “If you’re already meeting the mark when it comes to finances, paying down debt, putting extra cash in saving and covering your expenses, then the next thing to do is explore how surplus money can impact your life,” she says.
Cole recommends making a bucket list of what you would do if you had extra cash to spend. However, she warns against simply making a list of expensive items to buy. Instead, she recommends focusing on ways to spend money that will either create a long-term memory such as a trip or a special dinner or will improve your life such as joining an upscale fitness center that offers yoga and meditation if you’re into wellness.
Jenny Mahlum, an integrative psychotherapist at New York Counseling in Manhattan, agrees that if you’re looking to invest in your happiness, it’s best to focus on novel experiences rather than accumulating items. “While we might momentarily get a burst of joy when wear a new sweater or drive a new car, eventually the novelty tends to wear off and you stop appreciating the experience of the item you just bought,” Mahlum says. In comparison, a novel experience can create a new memory.
Here are five unique ways to use your tax refund to invest in your happiness.
1. Take a class or workshop that would give you skills to generate side income or help you get a promotion.
Learning a new skill can increase your sense of accomplishment and confidence, and that could contribute to feelings of happiness, Mahlum says. She recommends framing this purchase as an investment in yourself and align it with your values and a larger sense of purpose rather than seeing it as a means to earn more money so you can buy an extra sweater or handbag.
Generating more income through a side hustle or getting a raise also creates a sense of abundance, which generally makes people feel happier and more secure, Weir says.
2. Make a home upgrade that would bring you joy, such as creating a reading nook or mini-indoor garden.
A home upgrade that creates a mini sanctuary has the potential to bring joy daily however, Mahlum recommends spending time reflect on it beforehand to make sure it’s really something you want to invest in. Think about why you want it and imagine yourself using it otherwise, if you build it and don’t use it, you might feel guilty, Mahlum warns.
Keep in mind that a home upgrade doesn’t have to be elaborate. Cole recommends walking through your house and thinking about where you spend the most time and how you could make that area more comfortable. For instance, maybe you want to make your bedroom cozier with new pillows and hotel-quality sheets.
Think in terms of little delights. “Sometimes it’s a good meal, a good chocolate, a special coffee blend or cozy pajamas,” Weir says. “Anything that makes you feel physically comfortable.”
3. Create a “try something new” fund and use the money to experience something new each month.
According to research by Dr. Laurie Santos, experiences tend to make us happier than material possessions because they provide a sense of social connection and personal growth, Mahlum says.
Novel experiences tend to bring people joy, Weir says. There’s something about trying something new that gives us a sense of accomplishment and provides a release of dopamine.
4. Create a “happiness fund” to pay for random acts of kindness like paying for a stranger’s groceries or supporting a local artist.
People feel joy when they are being generous with others, Weir says. There is also an empathy layer, she says. When you see that someone else happy, it can make you feel happy too.
People report a boost in happiness when completing good deeds for others. A study by researchers at Ohio State University found that performing acts of kindness can ease depression and anxiety.
5. Create a “micro-adventure” fund and use the money for several unique experiences throughout the year rather than waiting until you’ve saved enough for a big, three-week vacation.
Curate experiences for yourself that create feelings of awe, Mahlum says. “We underestimate what feelings of awe can elicit in us in terms of a higher sense of well-being that can cascade into feelings of joy and creativity,” she says.