Getting the most from your refund
10 Ways to Put Your Tax Refund to Work
by Gary Foreman
8 Reasons Why You Don't Have an Emergency Fund
Could You Earn Enough Money Being Self-Employed?
How to Choose Between a Regular and Roth IRA
It's that wonderful time of year with the beginning of spring, and tax refunds! Most of us look forward to both. But, unless you're a big time gambler, the tax refund will be the one that has the biggest impact on your finances.
There's a reason for that. In 2015, 39,964,000 people got a tax refund with the average refund being $3,120.
Although the IRS is really just returning your money to you, it feels a little bit like "free" money. And, as free money is prone to do, it often just disappears once you get it. So if you're tired of feeling bad after your tax refund disappears, consider one of these ten ways to put that tax refund to work for you.
Make your home more energy efficient. You've been complaining about your heating and cooling bills. This is your chance to add some insulation or install new energy efficient windows. You'll see a payback every time you open your utility bill. And, you might even get a tax credit or rebate to cover part of the expense.
Invest in additional education. The labor market keeps changing. Old skills are becoming obsolete. New skills are required. Your tax refund could pay for night or online courses to increase your skill set and make you more valuable as an employee. The new skills might help you keep your job or even get you a raise!
Pay off student loans. Americans owe nearly $1 trillion in student loan debt. Approximately 44% are in deferment or forbearance, which means that they're not currently being repaid, but are still adding interest to the balance. If you owe student debt, this could be your opportunity to take a chunk out of that balance.
Invest in your health. Even if you have good medical insurance, bad health can be costly in medical bills, lost time, and lost wages. Use your refund to join a weight loss or smoke enders program. Or join a health club and begin working out regularly.
Invest in a new career or business. Many of us work in jobs that aren't going anywhere and never will. Use your refund to start a small home business or pay for classes that will lead to an entirely new career.
Buy an IRA. The money you put in an IRA is tax deductible. Too many of us get to tax time and fail to fund an IRA because, well, we have a failure of funds! Don't wait until next tax season to try to find money for your IRA. Use this year's tax refund and you'll increase the size of next year's refund. Plus, you'll have additional money available for your retirement.
Offset the pain of recent price increases. Rising food and gasoline prices have thrown many family budgets into turmoil. You can't stop eating or driving to work. Use your refund to buy prepaid cards that will only be used for gas or food. Unless there are significant further prices increases, you should be covered for the balance of the year.
Earn money on your credit card forever. Suppose that you continually carry a balance on your credit card. Further suppose that you used your average $3,034 refund to pay down the balance. At a typical credit card interest rate, that would be like getting $400 each and every year!
Would you like to
pay off your credit cards
in less time
for less money?
Invest in a pantry. There are some grocery items that you know you'll use. Use some of your refund to stock up when those items are on sale. You'll reduce future grocery bills.
Create an emergency fund. Sooner or later you'll have an unexpected expense. Typically they end up on your credit card and you take months to pay them off. With money set aside for unexpected expenses, you'll avoid the interest expense and be able to save for the next "emergency."
Take a vacation. Ok, this last one isn't going to pay any dividends later, but if you're not going to use your refund to further yourself financially, at least you'll have some memories to enjoy!
Reviewed March 2017
Gary Foreman is a former financial planner and purchasing manager who founded The Dollar Stretcher.com website and newsletters in 1996. He's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, Credit.com and CreditCards.com. Gary shares his philosophy of money here. You can follow Gary on Twitter. Gary is also available for audio, video or print interviews. For more info see his media page.
Take the Next Step
- Make sure you're getting the best CD rate. Use our simple CD tool to find out. It's completely private, easy to use and you'll know what rate is available to you in seconds!
- Stop allowing debt to prevent you from doing the things you want. These 6 steps to getting out of debt can solve that problem. Get started today!
- Get the interest you deserve! Compare money market and savings account rates with our best rate finder. It only takes a minute and your privacy is completely protected.
- Get control of your financial life. Subscribe to Financial Independence, a free daily email that provides you with the tools to help you gain that control and achieve financial independence. Subscribers get a copy of Are You Heading for Debt Trouble? A Simple Checklist for FREE!
Share your thoughts about this article with the editor.
More Money Tips & Tools
- The best sources of adult education for updating your resume
- Personal finance calculators everyone should use
- How financial wellness differs from wealth
- Saving-money secrets of the rich and frugal
- 5 low-risk ways to earn higher interest now
- How to save money fast
- 7 IRA withdrawals that don't trigger a penalty
- This week's Readers' Tips