Smart Tax Refund Moves

4 ways to make the most of your refund

There’s no denying the joy that comes from receiving a tax refund. While it’s not truly ‘found money,’ it can feel a bit like winning the lottery and it’s easy to start dreaming big about the possibilities. But before you start pricing out flatscreen televisions or other non-essentials, spend some time considering how you might use your refund to change your financial status or secure a better future for you and your family.

Here are four ways to potentially make the most of your refund:

Pay down high-interest debt

If you have a high-interest credit card or other loan draining your monthly cash flow, applying your refund to the outstanding balance can help reduce—or if you’re lucky, eliminate—the debt. Reducing debt not only saves you money on interest payments but also improves your overall financial health and credit score.

Boost (or build) a financial safety net

Having a financial safety net or emergency fund can provide peace of mind and protect you from unexpected expenses, such as medical emergencies or car repairs. Setting aside 3-6 months’ worth of expenses to only be accessed in case of an emergency, will allow you to weather unplanned expenses or loss of income with more ease and less panic.

Invest for the future

If you don’t have a lot of debt and your emergency fund is well funded, consider putting your refund toward retirement. Even a modest refund added to or used to open either a traditional or a Roth IRA can, over time, yield a significant amount of retirement income. Just be aware that the limits for both types of IRAs in 2024 are $7,000, or $8,000 if you’re age 50 or older.

Build the value of your home

Yes, home improvements and renovations can make your home more attractive and livable, but more importantly they work to increase the value of your property. For tips on which home improvements yield the best return on your money, click here. 

Of course, there’s no harm in putting your refund towards items on your wish list if you don’t have a lot of debt and your emergency fund is solid. Or, if you’re charitably inclined, a donation of any size can make the difference in the life of someone less fortunate than you. Just remember it when you file next year’s taxes.

DISCLAIMER: This article is meant for educational purposes only and is not intended to be construed as financial, tax, investment or legal advice.