7 Better Ways To Spend Your Tax Refund

MAKE A PLAN FOR YOUR TAX REFUND TODAY.

If you’re getting a tax refund this year, it’s time to make a plan on what you’ll do with the extra money. Otherwise, without a plan, who knows where all that money will end up.

Here are 7 better ways to spend your tax refund this year:

Don’t let your tax refund escape you.

1. Pay down your credit card debt. If you have any credit card debt, use your tax refund to pay it down. This is a huge savings, especially if your credit card has high 18-25% interest rates.

2. Build your emergency fund. If you don’t have about 6-12 months of expenses in an emergency fund, consider using your tax refund to build it. With a solid emergency fund, you’ll have a stress-free plan when your car breaks or if you lose your job.

3. Fund your Roth IRA: If you’re eligible for fund a Roth IRA based on your income, you could contribtue up to $5,500 for 2013 (Or up to 6,500 if you’re 50 years old or older).

4. Save for major home repairs or renovations. Consider a sepearte nest egg if you have plans for a major home renovation like replacing your carpet with tile or hardwood. That way, you can plan ahead and stay within your budget for the project. Saving your tax refund might even help you pay cash instead of credit for the project.

5. Save for education expenses. Paying for college with cash is a great way to get ahead financially and not spend your life in student loan debt.

6. Pay down your mortage. Since my goal is to pay off my mortgage in 5 years, I put my entire tax refund towards my mortgage. Of course there are other ways I’d rather spend my money, but this is my financial priority right now. Any money that I put towards my mortgage, is less interest I will have to pay later.

7.  Save for Christmas Now.  Another option is to use your tax refund to save for Christmas now. Budget how much you typically spend for Christmas and set it aside so you’re not using a credit card to pay for Christmas this year.

How will you spend your Tax Refund?

Leave a comment

  1. Daisy says

    I’m not getting a tax refund unfortunately, but if I was, I would have spent it on either retirement savings, or maybe a portion of it on professional development. There is a course I want to take that I think would give me a competitive edge against my peers in the next promotion. However, it’s fairly expensive so it would have been helpful to have something like a refund!

  2. says

    This year for the first time, I’m actually getting back about $4500 and I have no idea what I’m going to do with that money. Probably pay off some of my student debt and most likely, the rest is going to the emergency fund.

  3. says

    Great list! I’ve been struggling to build up an emergency fund, because I’ve been pretty bad at planning for unforseen expenses.

    Thankfully for me, my tax year doesn’t end until 30 June, so I have plenty of time to start planning what to do with it.

    No doubt that this year, rather than wasting money on gadgets, cars etc, anything I get back will go towards my plan on how to become a millionaire!

    • says

      You bring up a great point. Anyone who’s getting a large tax refund should consider adjusting the withholding to keep more money in their monthly paycheck. My income tends to fluctuate so I keep it this way.

    • says

      That’s a great plan, that way you’ll have cash for home repairs. I was so glad to have the extra cash when I tore our my carpet and put in tile. My flooring company was spot on with the estimate but I was prepared, just in case!

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