Tax Refund Vacation? If so read this
Updated: Feb 19, 2019
If you're like me and most of america, this is the time when most adults are waiting for the oh so loved tax refund check from the IRS. Many of us have come to expect a tax refund around this time of year. In reality we should be looking into why we are receiving a tax refund in the first place however, today we are looking at how we can stretch the refund out on a much needed vacation.
Now here at Invest Your Hear Out we believe that investing your money into something that will give you an ROI (Return On Investment) like the stock market, real estate, or taking advantage of an early contribution to your IRA should be priority but, we understand that even with as much advise as possible sometimes you just need to get away and refuel for the rest of the year with a nice vacation from it all.
So let's look at how we can stretch your refund dollars and fully utilize that refund for a good vacation.
Step one: Have a Plan.
Now on average most Americans receive $2,782.00 back each year from the IRS more if you take advantage of the child tax credit, but using this number as a baseline you can understand why a budget will be very important to stick to if you intend on using only the refund money. Start with my 10% rule, Whatever money you get back either from taxes or birthday/bonus money, save 10% of that and budget whats left.
With close to 3,000 dollars you need to decide first on where are you going?
Plane tickets for more than one person in this budget will eat up a significant percentage of your refund so if you can drive to your destination i would recommend it because not only do you save on the flight expense but you save on an uber/rental car bill. Public transit can be cheaper if traveling to NYC but most other cities or destinations have under developed transit systems, which could leave you walking for a considerable portion of your trip.
If traveling outside of the country i would recommend using groupon travel packages because the deals are pretty insane and cover hotel as well. which bring me to my next step
Step two: Where are you staying?
Where you stay will have a big impact on the over all cost of things, a lot of hotels have free breakfast which can give you fuel for your day and I enjoy staying at hotels that offer a full kitchen, making your own meals can usually help avoid the temptation of over spending on alcohol or desert as well as the added benefit of having leftovers can save even more money.
With step one you should have an idea of some of the things you want to do/ see so location needs to be a factor as well, spending 10 dollars per night more and avoiding a 20 mile drive to your destination can be saving you both time and money. Make sure to ask about parking, some hotels due to location will charge for overnight parking which can negate the point i just made and make driving worth it. For instance staying in Washington DC most hotels charge a parking fee but if you stay in Alexandria right next door you can save 50-70 dollars a day by staying 5 miles away.
Step three: Stay money conscious.
A vacation isn't a vacation without stepping outside of your normal experiences so do enjoy yourself and try to have fun, but remember, most of the time your destination will have plenty of unnecessary items for you to spend your refund money on, do you really need that i love NYC shirt? I save as much as possible so that when I need to spend my money i can spend it on the things that i really want to do, the little things in between will bleed your budget dry!
Step Four: Leave the credit cards in your hotel safe.
The goal here is to enjoy yourself not get into debt and be even more stressed out when you get back to everyday life. I'm not saying leave the credit cars at home because when utilized right a credit card can be an asset in the sense of having emergency money on a car repair or for whatever means you might have, however if you don't take them with you you lessen the chance for randomized spending. Bring what money you think you may need plus a little extra but try and maintain that budget as best as possible.
So try and put blinders on and avoid the typical tourist money pits so that you can have a great time and truly enjoy yourself without going broke in the process.
In conclusion if you need a vacation this can actually be a good way to take one without diving into savings but if you want to pay yourself every month look into a REIT my favorite REIT Realty Income $O has been a winner for years and pays me monthly. Look into paying yourself back instead of flushing your money down the drain.
If you would like to follow the 10% rule mentioned in step one then read this article to invest in the stock market for the first time for free and see how easy it is to invest in the stock market. https://www.investyourheartout.com/blog/trade-100-free-with-robinhood