It’s the question on every entrepreneur’s mind when they receive their tax returns — what should you do with it and where do you spend the money? While this may be the fun upside to doing taxes, spending your return is a thoughtful process. Some small business owners may want to do it while others won’t or will consider going 50/50 on spending. If you haven’t decided what to do with your own yet, here are a few great investments entrepreneurs can make with their hard-earned chunk of change.
Put it in savings
We’re kicking off this listicle with the most responsible decision — and interestingly enough, the most popular one with taxpayers. According to the National Retail Federation’s Tax Returns Survey, 48% of Americans plan to tuck their returns into their savings in 2017, the second-highest number on record.
Why the push to save as opposed to spend? While this rise may be attributed to the millennial generation opting to be financially savvy, it’s also because only 66% of taxpayers profiled expected to receive a refund this year. And while saving isn’t as fun as spending, it’s actually incredibly beneficial for small business. A 2016 JPMorgan Chase Institute study revealed that most small businesses only have about a month’s worth of money on hand to cover expenses if inflows stop — and adding in a tax return is a great way to rebuild savings so your business isn’t living month to month.
Pay off debt
The second most popular spending option, 35.5% of Americans plan on using their tax returns to pay down debt. When you own a small business, eliminating debt is the best possible thing you can do for the company. Earlier this year, I shared some tips for paying off business debt including hanging on to receipts, cutting costs on everyday expenses like recycling and electric bills, and paying off debt using the Snowball and Stack Methods. The Snowball Method opts to pay off debt with the smallest balance first, gradually moving up the ladder, while the Stack Method starts with the biggest interest rate first and moves down to debt with smaller interest rates. Determine what the best method for your business is and begin paying down, and eventually off, debt accordingly.
Take a vacation
Alright, let’s get into some of the fun ways to treat yourself! 10.7% of Americans surveyed by NRF will be going on a vacation with their tax return this year. For small business owners especially, this is a great way to take some much-needed me time to rest and recharge. It’s also helpful for combating any possible burnout you feel might be on the horizon. All work and no play makes just about everyone very dull humans and getting the chance to get away allows entrepreneurs to come back stronger with a fresh perspective and better ideas.
Splurge on your work family and office
Can’t schedule a vacation right away? You might want to consider refreshing the workplace and treating your team instead. 7.6% of Americans will spend their return on a “splurge” purchase and you can do the same at the office too. Give your team small bonuses, invest in marketing or another department initiative that you have had on the back burner for a while, refresh the office with new furniture or computers, or throw a party to celebrate your team and all of their hard work!
Deborah Sweeney is the CEO of MyCorporation.com which provides online legal filing services for entrepreneurs and businesses, startup bundles that include corporation and LLC formation, registered agent services, DBAs, and trademark and copyright filing services. You can find MyCorporation on Twitter at @MyCorporation.