tax refund

7 Ways to Make the Most With Your Tax Refund

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If you filed your taxes on time this year, there’s a good chance you’ll be getting some money back in the form of a tax refund.

How big was your tax refund this year?

It may be tempting to spend it all at once, but you don’t want to blow all your money in one place.

To make the most of your hard-earned money, try these 7 ways to spend your tax refund.

Think about your financial needs before spending your tax refund money

It’s that time of year again when many people are eagerly awaiting their tax refunds.

While it can be tempting to spend that money as soon as possible, it’s important to take a step back and think about your financial needs before making any rash decisions.

For example, if you have outstanding debts, using your refund to pay them off could be a wise move.

Or, if you’re trying to save up for a major purchase, such as a new car or a down payment on a house, your refund could give you a nice boost.

Whatever you decide to do with your money, it’s important to weigh your options carefully and make sure that you’re making the best decision for your financial future.

7 Ways to make the most with your tax return

There are a number of things you can do with that money to make your life a little easier.

We’ll outline seven ways to make the most of your tax refund.

So read on and get started!

1) Start an emergency fund

The first thing you should do with your tax refund is start an emergency fund.

An emergency fund is like an insurance for your finances and covers you in case any big-ticket emergencies come up—medical issues, unexpected job loss, costly home repairs, etc.

If you’re not sure where to stash it, some banks will allow you to put money into savings on a tax-advantaged basis.

You can also set up a high-yield online savings account.

With an emergency fund, you’ll have money available that you can access easily.

Because emergency funds aren’t intended for ongoing expenses like rent or regular purchases, it shouldn’t be earning interest in a traditional savings account.

Ideally, it should be liquid—meaning it should be easy to convert into cash—and placed somewhere safe where you won’t need to worry about losing your money or having unexpected fees.

Emergency Fund

2) Pay down high-interest debt

High-interest debt is crippling and often impossible to get rid of.

Before you splurge on anything else, pay down your credit card balance, car loan, or other high-interest debt.

This can save you hundreds or even thousands in interest charges over time; by contrast, spending your tax refund on new clothes will save you only a few dollars per month.

With interest rates so low now, make it a priority to pay off that bad debt and to increase your credit score—you’ll thank yourself later.

You could also consider using your tax refund for a debt consolidation loan if you’re struggling under a pile of credit card bills.

Consolidating your debts into one affordable loan can save you hundreds in interest charges.

But make sure that you don’t take on more debt than you need.

For example, consolidating car loans and credit card bills will save you money, but don’t add in student loans or other high-interest debts unless they have been problematic as well.

A good rule of thumb is that consolidation should not increase your total monthly payments by more than 15 percent (including interest).

tax refund

3) Contribute to an HSA

With a tax refund and savings, consider contributing to an HSA.

People don’t usually get a tax refund all that often; so making good use of it means having some money for more than just one big expense.

An HSA is a tax-advantaged health care account you can use to pay for medical expenses in retirement.

If you haven’t contributed to an HSA before, start with your tax refund because it will be easy to set aside from any other savings you have on hand.

Then try saving what you would have spent on taxes next year and continue until you reach your goal.

Over time, you can set aside thousands of dollars in tax-free cash that can be used later in life when medical expenses are higher than they are now.


4) Use the tax refund money to invest in yourself

A tax refund is a windfall and something most people aren’t expecting.

So, it’s important not to immediately spend your money on short-term purchases like concert tickets or Netflix subscriptions.

Instead, use it as a long-term investment in yourself by improving your skills or work environment.

For example, if you’re looking for a career change but aren’t sure what to do next, sign up for coding classes or online courses that’ll help you learn new skills.

Or if you want more money in your pocket next year, treat yourself to business conferences or workshops that can help you get ahead of your peers in terms of salary and job title.

No matter what you choose, if you’re not working on it now is a great time to start.

In some cases, it can even help you stay current in your existing position by improving your skill set or increasing your value as an employee.

A tax refund is an unexpected gift—don’t waste it!

tax refund

5) Give to charity

One important way you can spend your tax refund is by supporting a cause.

If you’re like most people, you probably don’t have enough money in your savings account to cover all future emergencies or unexpected expenses.

When it comes time to tap into those funds, wouldn’t it be better if they were going toward something good?

Give some thought as to how much you should give, who to, and what area/cause is most important.

Donating a portion of your tax refund not only helps others but also reduces your stress level knowing that there is something good being done with it and increases self-esteem knowing that you are giving back.

For example, consider donating some money for cancer research instead of going out for dinner.


6) Save more for retirement

It may seem smart to just put all that extra cash into your savings account.

But with a bright future on the horizon, it’s important not to blow your tax refund on something frivolous.

That money should go straight into a tax-advantaged retirement account—like an IRA or 401(k).

And if you can’t afford both?

The general rule is that you should contribute enough money each year until you max out one or both accounts before thinking about other goals like saving for a down payment on a house.


7) Enjoy yourself without going broke

Maybe you want to go on a shopping spree; while that is a fine thing to do with your refund, it won’t make you happier in the long run.

Go out and have fun instead: go out with friends and family, catch a ballgame or watch an action movie.

Those experiences will improve your mood and make you more productive when you return to work.

And may even give you inspiration for some great new ideas!

There’s nothing wrong with using part of your tax refund for such pleasure spending; just don’t get carried away and blow it all at once.

It is important to save money, but try to do it without sacrificing your lifestyle.

tax refund

Where is my tax refund?

Last year, it took about 21 days on average for refunds to be issued, but that’s just an average.

Don’t panic if it takes longer than that — many filers had theirs within weeks.

If your return is still pending after two weeks, follow up to understand what’s going on.

The vast majority of tax refunds are issued by direct deposit, but you might also request a paper check or have your refund applied as a credit toward next year’s tax bill.

Paper checks are usually mailed within six weeks after filing.

If you want your refund right away and don’t care about using it as a credit on next year’s return, go with direct deposit.

Whatever you do, make sure that your bank account information is up-to-date with IRS (and Social Security Administration) records before filing; otherwise, your refund could be delayed by several weeks.

The fastest way to do that is using IRS’s Where’s My Refund? tool available here.

Does everyone get a tax refund?

Tax refunds are based on how much you pay in taxes.

If your income is low, or if you have lots of deductions (such as mortgage interest or student loan interest), then you may get a tax refund each year.

If your income is high and/or your deductions are minimal, then you probably will not get a refund.

Every tax refund is different, but it’s common for households earning between $25,000 and $50,000 to receive a tax refund each year.

If you do get a tax refund, you likely receive more money back than you owed in taxes.

The most common reason for that is that your adjusted gross income (AGI) was lower than expected due to deductions or credits.

You also may get extra money back if you had a student loan interest deduction or if your state offers a tax credit.


No matter how you choose to spend your refund, we hope that you take advantage of at least one of these tips and make the most of your money.

With careful planning, you can put your tax refund to good use and start saving for the future.

Have you already decided what you’re going to do with your refund?

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