Getting the most from your refund

10 Ways to Put Your Tax Refund to Work

by Gary Foreman

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.

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!

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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.

Related: Could What You Know Make You Money?

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.

Related: How to Choose Between a Regular and Roth IRA

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!

Use these guidelines to choose the best plan to pay off your credit card balances.

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."

Related: Easy Ways to Build an Emergency Fund

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

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Gary Foreman

Gary Foreman is a former financial planner and purchasing manager who founded The Dollar website and newsletters in 1996. He's the author of How to Conquer Debt No Matter How Much You Have and he's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, and Gary shares his philosophy of money here. Gary is available for audio, video or print interviews. For more info see his media page.

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