9 Ways to Spend Your Tax Refund (That You Won’t Regret)

March 14, 2017

9 Ways to Spend Your Tax Refund (That You Won’t Regret)

Last year, the average American received a federal tax refund to the tune of $2857. Will you find yourself with an additional $3000 in your pocket this tax season?

There are a million and one ways you could spend your tax refund. If you take a look at the promotions in your email or pay attention to the commercials that are amped up during tax season you’ll be invited to “make the most of your tax refund” by doing one of the following:

  • Purchase a new car (complete with new car payments, of course)
  • Buy new clothes
  • Buy a computer, tv, or other big-ticket electronic
  • Laser hair removal
  • Body sculpting and other cosmetic procedures

These are just a sampling of the “suggestions” for your refund that you’ll find advertised during tax season.

Now, there is nothing wrong with spending your tax refund on a needed purchase. The keyword here, though, is needed. If you blow your refund on something frivolous, you are missing an opportunity to do something worthwhile with your money.

Keep in mind that a tax refund indicates an overpayment of taxes on your part. It is not a gift from the government. Look at your refund as money that should have been in your pocket throughout the year and you will be less tempted to spend it impulsively.

Consider using your tax refund in a way that has lasting and positive implications and in a way that you won’t regret. Here are some ways you can do that.

1. Get Caught Up on Bills

If you are behind on any of your bills, hands down, getting current should be the first thing you consider doing with your tax refund.

2. Establish or Add to An Emergency Fund

Consider starting a beginner emergency fund or pad an existing one.

3. Pay Off Debt

Take advantage of your windfall to make a dent in your credit card balance, student loan, car loan, or other debt. Don’t forget about family loans. I’m sure Aunt Sally wouldn’t mind getting her money back.

4. Get One Month Ahead in Your Rent or Mortgage

If you are usually paying your rent or mortgage with the paycheck you receive the same week it’s due, put an end to that cycle by getting a month (or more) ahead with your housing payment.

5. Put it Towards a Savings Goal

If you are currently saving up for a large purchase, vacation, or another savings goal, give your savings a boost.

6. Pre-pay Insurance Premiums

If you are on a payment plan for your car, homeowner’s, or renter’s insurance, consider paying the premium in full. You’ll save money in the process!

7. Start a Sinking Fund

Are you a couple of years away from needing a new car or doing a major repair in your home? Figure out how much you will need to save per month until that time comes. Jumpstart your sinking fund with your refund.

8. Donate It

Consider giving all or a portion of your refund to your church or a charity, especially if you’ve been “meaning to give” throughout the year but never got around to it.

9. Open a Roth IRA

Take your refund and fund your retirement. Check out these best places to open a Roth IRA as well as other ideas for investing your refund.

There are many things you can do with your tax refund; you certainly are not limited to these suggestions. These options may not represent the most fun things you can do with your refund, but again, keeping in mind that your refund represents YOUR money that you so kindly let the government use throughout the year, choosing to make a responsible decision with your money is a no-brainer. You will have no regrets if you spend your tax refund in one of these ways. Consider which option is the best for you.

Are you expecting a tax refund this year? Do you already know what you plan to do with it?

Are you expecting a tax refund? While there are many ways you can spend it, choose a path that you won't regret.