Money Saving 101: Using Your Tax Refund Wisely

Some Americans will see a tax refund from Uncle Sam this year. Most of us that get the tax refund will thinking about blowing it on something and then regret whatever we’ve blown it on later. Here are 10 ideas for using that tax refund wisely:

If you don’t have an emergency fund, sock that money away in a savings account. That extra amount will come in handy someday soon. You never know when you’ll get in a car wreck or break a limb or have that 10 year old air conditioner decide to die on you. And, no, getting the latest PS3 game is NOT an emergency!

Pay off debt! I can’t stress this one enough. Start with the highest interest rate and work your way down from there. Think of paying off debt as a set of stairs. Take one step at a time. Put extra money towards the largest amount with the largest interest rate first while paying some on the rest of your debts. Then check off each time you’ve paid off a debt. Once you see that you’re making progress, it’ll be a nice boost to get going on the next one.

Buy that new pair of jeans/shoes/sweater you’ve been wanting for a long time. In my experience, most of us do not budget our tax refund into our household budgets. It’s okay to spend a little on yourself. I bought a pair of Sperry Top Sider shoes that I've been wanting forever. I planned out a portion of my refund to spend on myself and put the rest in my savings account.

Go on a vacation. If you’re like me, you love to travel. Make your money work for you on this vacation. Budget to use only the money you’ve gotten back in your tax refund.

Replace one appliance. Do you have a 1960’s stove like I do? Or a 25 year old furnace? Replace one with an energy efficient model. You’ll see a big savings in your utilities over the course of one year.

Take a class at a local college or community center. There is always value in education. It doesn’t matter how old you are, there is more you can learn.

Start a college fund for your kids or future kids. A 529 savings plan for each of your kids would be great. Even if you can’t afford to pay for your child’s entire college tuition, I’m sure they’ll appreciate some help. Click HERE for more information on the 529 account.

Save that money for Christmas or another holiday. I will be the first to admit that I like to buy people lots of presents at Christmas. Having that money saved up to use at the holidays would come in very handy.

Finally, if you’re getting back large sums of money during tax refund season, check in with your employer about changing your W-4 and state tax deductions. If they’re taking too much out during the year and you’re getting a large refund, that’s basically like letting Uncle Sam borrow your money interest free for an entire year. Instead, put that excess into a savings account during the year and earn some interest on it. 

What are some other ways that you’ve wisely used your tax refund?