ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Smart Ways to Use Your Tax Refund

Updated on May 4, 2017
SMD2012 profile image

Sally is a business communications coach who gives workshops on how to keep your professional reputation squeaky clean and drama-free.

Are you expecting a tax refund this year? Don't treat it like a windfall. Treat it as an opportunity to improve your financial health. Read on to learn more about how to make the most of your tax refund.

Tax Refund Time: 'Tis the season to pay off debt.

Using your tax refund to pay off high interest credit card debt is a smart money move.
Using your tax refund to pay off high interest credit card debt is a smart money move. | Source

Get the most value out of your tax refund once it arrives.

With tax season upon us, many of us put a great deal of effort into organizing the previous year’s charitable donation receipts, childcare costs, business expenses and other tax-deductible transactions to maximize the amount of our tax refund. After all that effort to get the biggest tax refund possible, it also makes sense to carefully think about what we should do with that refund.

Here are some tips on how to make sure your hard-earned refund continues to grow, instead of getting frittered away on a new wardrobe, a 1-week vacation, or an outdoor whirlpool spa that just adds to your monthly utility bill (unless of course, you enjoy having an ice-cold hot tub).

As with all major money decisions, consult a qualified accountant or financial planner to see which options are best suited to your needs.

Save for your child’s education. Putting a lump sum amount into your child’s college education plan is a great way to boost the fund’s principle while taking advantage of compound interest over the next few years. Some governments even match your contributions up to a certain amount – a great way to recoup any interest you lost while the government held onto your refund all year.

Make energy efficient repairs around your home. New windows, doors, insulation and energy efficient appliances are great ways to extend the value of your refund by saving you money on your monthly utilities and increasing the resale value of your home. Everyone wants to do their part to save the environment, and in some countries, the government will support your green efforts with tax credits on certain energy efficient home repairs.

Pay down your mortgage. If you have a mortgage that allows you to make pre-payments without penalty, applying your tax refund towards the principle can save you hundreds of dollars in interest and take you one step closer to being mortgage free.

Pay down high-interest debts and consumer loans. The sooner you can get rid of high-interest credit card debt and car loans, the sooner you can free up that money for other living expenses. Some credit cards can charge up to 17% per annum. Here's another way to make paying off your high interest debt an even more efficient use of you tax refund: have the amount you were paying each month put it into an automatic savings program. You won't miss the money and at the end of the year you'll have a nicely padded savings account with a few hundred dollars in it.

Create an emergency fund. One of the reasons many people go into debt is that they don't have an emergency fund to handle unexpected expenses. The car breaks down and needs to get fixed right away. A family member out of town falls ill and you need to buy plane tickets and take time off work. A major household appliance stops working. These types of expenses can easily end up on your credit card if you don't have a reserve of emergency cash to cover the bills. Putting aside all, or even a portion, of your tax refund to cover future unexpected bills can keep you from ending up with unnecessary credit card debt.

Donate your tax refund to a cause close to your heart. Give to a local hospital, an animal shelter, an environmental cause—anything you believe in and feel passionate about. Investing your income tax refund in the well-being of your community improves your quality of life. Giving to others is good for the soul and also a necessary component of creating more prosperity, joy, and affluence in your life. At the very least, handing your tax refund over to a charity in the form of a donation will help reduce next year’s income tax bill!

Contribute to your retirement savings. Like a contribution to your child’s college fund, making a contribution to your own retirement fund will give it a boost along with the added bonus of earning compound interest. The sooner the compound interest starts to grow, the more it will make in the long term.

Getting a big check in the mail can be exciting: it feels like a small windfall, perhaps even free money. But don’t forget, your tax refund is money that you earned (and the government held onto it interest-free right up until tax time). If you normally make sound decisions about how you spend your money throughout the year, getting a large tax refund calls for equally sound decisions about how you use it.

Put your money where your home is.

Do the math! If you have a mortgage, paying it down with money from your tax refund can be a smart money move.
Do the math! If you have a mortgage, paying it down with money from your tax refund can be a smart money move.

If I get a tax refund this year, I plan to:

See results

Video Tips: Using Your Tax Refund Wisely

Start thinking about what to do with your tax refund now.

If you think that you will likely have a tax refund coming to you this year, make sure to prepare and file your taxes as early as you can so that you can start using your tax refund as soon as possible!
If you think that you will likely have a tax refund coming to you this year, make sure to prepare and file your taxes as early as you can so that you can start using your tax refund as soon as possible!

© 2012 Sally Hayes

Comments

Submit a Comment

  • SMD2012 profile imageAUTHOR

    Sally Hayes 

    6 years ago

    @bankscottage Thanks for the pointer to your Hub on tax refunds. I'm in Canada and I can only talk about general tax issues so I appreciate you adding such a useful, specific tip here. Have a great day!

  • SMD2012 profile imageAUTHOR

    Sally Hayes 

    6 years ago

    @skear Me too!

  • bankscottage profile image

    bankscottage 

    6 years ago from Pennsylvania

    Great suggestions.

    You can let the IRS automatically take away some of the temptation to spend your refund. When filing your return you can use Form 8888 to split your refund into up to 3 accounts. You could have part go to checking for bills, part to savings for a rainy day, and part to a brokerage account to save for retirement in an IRA. Check out my hub on this.

    Good hub. Voted up and useful.

  • skear profile image

    Sam Kear 

    6 years ago from Kansas City

    Nice ideas! I'll probably be spending mine on #4.

working

This website uses cookies

As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://hubpages.com/privacy-policy#gdpr

Show Details
Necessary
HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
LoginThis is necessary to sign in to the HubPages Service.
Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
AkismetThis is used to detect comment spam. (Privacy Policy)
HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
Features
Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
MavenThis supports the Maven widget and search functionality. (Privacy Policy)
Marketing
Google AdSenseThis is an ad network. (Privacy Policy)
Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
Index ExchangeThis is an ad network. (Privacy Policy)
SovrnThis is an ad network. (Privacy Policy)
Facebook AdsThis is an ad network. (Privacy Policy)
Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
AppNexusThis is an ad network. (Privacy Policy)
OpenxThis is an ad network. (Privacy Policy)
Rubicon ProjectThis is an ad network. (Privacy Policy)
TripleLiftThis is an ad network. (Privacy Policy)
Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
Statistics
Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)