5 Smart Ways to Spend Your Tax Refund

‘Tis the season! It’s tax refund time. The time of year when you (hopefully) get a nice extra chunk of change delivered to you. Your first thought may be to go out and spend it however you please, but there are some other smart ways you can use your refund that will help you get ahead in your finances.

1. Pay down debt.

The holiday season was just a couple short months ago, and you may have some unpaid balances on your credit card, or perhaps those Christmas presents increased your already overwhelming balance. There’s also student loan debt, and how about a car loan? Unpaid medical expenses?  Use your tax refund to pay down those balances and free yourself from those pesky payments sooner rather than later.

Read: Two ways to pay off debt faster

2. Fund your emergency savings.

If you’re looking for all the reasons why having an emergency savings is important, take a look at this article. Whether you have only a few dollars in your emergency savings account, but know it should be more, or you’ve been working on building your emergency fund, but it’s been a slow, grueling process, your tax refund may be just what you need to get your emergency savings where you want it.

3. Put it toward your retirement.

You may have a 401(k) plan with your employer or have an IRA account. Either way, you’re on a great track when it comes to your retirement plan.  If you have an account with the option of making extra contributions, deposit your tax refund into that account to boost your retirement savings even more. (Always be sure to check with your plan administrator to go over contribution limits!)

4. Put it away for your personal savings goal.

Want to buy a house? Upgrade your furniture? Do some home improvements? Get married? Have a baby? Send your family to Disney? Go to college? These things are generally pretty expensive, and take some time to save up for. Put your tax refund toward something you really want in your future. Stay away from impulse decisions and practice delayed gratification. Save now for what you really want later.

Read: How to prioritize your savings and financial goals

5. Donate it (or at least some of it).

If you’re lucky enough to not have a need for your tax refund, or you only need/want some of it, there are so many organizations and people out there who would be so grateful to take whatever you’re able to donate. If you’re passionate about a cause or a specific organization, use your tax refund to show your support. It will not only feel really good, and be greatly appreciated, but it sets you up for the habit of giving back, and that’s a great habit to have.

Now I never said these were super fun ways to spend your tax refund. Any of these options aren’t going to give you anything shiny and new, at least not right away, but they will certainly build your financial wellness and help you feel more financially secure. Plus, if you get used to using your tax refund in these ways, you’ll never know what you’re missing when it’s gone because you created this habit. Trust me, I haven’t “enjoyed” a tax refund in three years, but it has given me a lower student loan balance.

How do you plan to spend your tax refund? Let us know in the comments below!

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