by Cristina Goyanes for SHAPE.com
How are you spending your tax refund?The only silver lining to spending headache-inducing hours of filling out tax papers is a nice refund. If you're expecting a check in the mail this season (congrats to you!), reward yourself with a a small portion of that rebate in a good-for-you way. Farnoosh Torabi, a personal finance expert and the host of "Financially Fit" on Yahoo! Finance, recommends five easy ways to put your money where your health is.
1. Invest in memories, not accessories. Supposedly you can't buy happiness, but damn, this season's hot new bag would sure put a smile on your face. Before you say "charge it," consider this: "Studies show that buying yourself experiences-like a vacation, yoga retreat, massage, or cooking classes-leads to increased happiness levels more so than buying material things such as a sweater or car," Torabi says. If you buy a new set of wheels, your glee will fade if your neighbor buys a nicer car, but a trip to the Bahamas is more subjective and harder to compare, she adds.
2. Finally get the fitness daily deal-and use it! Every other week or so, Groupon, Living Social, Gilt Groupe, and other local daily deals sites send you a nagging reminder that you can get in shape for cheap thanks to their crazy-good package offers on fitness classes, monthly memberships, and personal training sessions. Not only are these deals affordable, they're generally short-lived, meaning you only have to commit to a few classes and not a whole costly year. Plus the deal's expiration date helps fuel the fire (use or lose it!) and it's really easy to recruit workout buddies: Simply forward them the deal or post it on your social media networks.
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3. Cash in, save big. It may seem counterintuitive to withdraw some of your refund in cash (it's hard to keep track of where it all goes), but paying with green may actually help keep you in check. A 2008 study published in the Journal of Experimental Psychology: Applied found that paying with plastic encouraged consumers to purchase more. "Having something physical helps you see that when it's gone, it's gone, and you won't spend beyond your limit," Torabi says. "If you only limit yourself to say $20 a day and leave the credit card at home or in your locked desk drawer, you may not get that cookie or chips at lunch because it just doesn't fit into your cash budget."
Aim to withdraw about 20 percent or less of the rebate in cash to help pay for everyday items, like coffee, lunch, or a yoga class. "Try to get it in $50s" Torabi suggests, "because studies show the bigger the bill, the harder it is to break it, which means you'll hold onto it longer."
4. Open a flex spending account. One of the advantages of working for a company and not yourself is having access to tax deductible options such as a 401K and flex spending account. The latter could make a big difference in your medical bills, especially if you're on prescriptions meds or need contact lenses and glasses. "If you earn $50,000 annually and pay approximately 25 percent a year in taxes, having a flex spending account would reduce your taxes by $625," Torabi says. The limit you can contribute is $2,500 per year. See if you can max it out!
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5. Start a rainy-day fund. We know what you're thinking: You're young, fit, and healthy-why would you need a "just in case" fund? Well, get this: Starting at age 35, people have a 45 percent chance of being disabled for 90 days or longer before their 65th birthday, according to the Insurance Information Institute. "And among those people," Torabi warns, "there's a 70 percent chance of being disabled for another two years." (Just look at the Hurricane Sandy victims on Staten Island in New York City who are still suffering from the aftermath.) Taking time off from work doesn't just happen when you're on crutches or bed-ridden. Things come up-be ready for it.
More on SHAPE:
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by Cristina Goyanes for SHAPE.com
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