- Pay down debt
Get ahead of loan payments
If you have debt, this is one move you can make that can really improve your financial health. By paying off certain types of debt you pay less overall by reducing or eliminating the interest that would otherwise accrue.
- Plan for your future
Prepare for the unexpected
Experts recommend setting aside 3–9 months of take-home income for an emergency fund that can cover anything from car repairs to unexpected health care costs. If you haven’t started one, or are short of your goal, consider using your tax refund to begin saving or close the gap. On the other hand, if you’re someone with no money to set aside for emergencies, you may want to consider something like title loans to help get you out of a sticky financial situation.
- Contribute to your retirement savings
Setting aside some or all of your tax refund in a savings account, CD or IRA can help you build a comfortable nest egg so you can enjoy your well-deserved retirement years.
- Grow college savings
Contributing to college savings plans now can help prepare you for the costs of your child’s tuition, housing, books and transportation. Certain savings vehicles may offer greater results from interest compounded over time. Consider deposit accounts such as a custodial savings account or CD or investment accounts such as a 529 college savings plan or a mutual fund.
- Build an investment portfolio
Depending on your long-term goals, you may want to use your tax refund to start or contribute to an investment portfolio.
- Remodel your home
You may be able to increase the value of your home by using your tax refund to pay for upgrades or repairs. Installing double-paned windows or energy-efficient appliances may also help you save on your monthly utility bill.
- Pay yourself
Donate to charity
It’s rewarding to pay it forward by donating a portion of your tax refund to a philanthropic cause. Contributions to many nonprofits are tax-deductible, too.
- Invest in your career
Using a tax refund for professional training or continuing education classes is a great way to pursue a better job, larger salary or new career opportunity.
- Take a vacation
If you’ve taken care of all your financial obligations, a vacation can be a great way to treat yourself and unwind. Your tax refund can cover all or part of your expenses, whether they’re for a weekend staycation or a trip you’ve wanted to take for years.
What to do With Your Tax Refund: 9 Simple Ideas
by Marcela Gallego, Bank of America