4 Things to Do With Your Refund Check

4 MIN. READ

Key takeaways:

Your tax refund is an opportunity to get closer to your financial goals.
You could use this lump sum to build your savings, pay off debt, or invest.
We share our favorite tax refund tips below.

Going on a spending spree can be tempting when you get your refund check, but if you’re not careful, that money can go quickly.

Whether you’re getting a few hundred back or a few thousand, getting a lump sum of money can help you get ahead with your financial goals.

We’re here to share a few tips on how to use your tax refunds wisely.

Do One Fun Thing

It’s a lot easier to be responsible with that money if you plan on doing one fun thing with it. It could be buying something for yourself or planning a fun outing with friends or family.

Having something you enjoy to look forward to makes sticking to a responsible financial plan a lot easier. Instead of having a vague plan to treat yourself, pick one thing in advance and deciding how much you’ll spend on it so you don’t go over.

Build Your Emergency Fund and Savings

Now that you’ve splurged on something that makes you happy, it’s time to think about the future.
One of the best ways to spend a refund check is to build a safety net:

You could open a savings account and use your entire check to create an emergency fund if you don’t have one.
If you’re already saving for different goals, split your tax refund between short-term and long-term savings.
This boost to your savings will motivate you to keep saving more. Plus, building your emergency fund gives you peace of mind when an unexpected expense comes up

Use Your Tax Return to Make Debt More Manageable

Some people could get higher tax returns this year, due to a higher standard deduction and reduced taxes on tips and overtime. If you fall into this category, you could have some money left over after adding to your savings.

You could split your refund check between savings and debt payments:

Making a large payment on your credit card with the highest interest rate will lower your monthly payments and make your debt easier to manage.
With a lump sum in hand, you can make a large payment on a loan. This will help you pay off the loan faster, and it can even give you leverage to renegotiate your monthly payment with your lender.
If your current lender is not willing to lower your payment, use your refund check to reduce your balance and consider refinancing your loan.

Depending on your financial situation, you might want to prioritize debt payments over savings. Getting your tax return can be an opportunity to get back on track and make your debt payments more manageable for your budget going forward, on top of boosting your credit score.

Invest Your Return Check for Long-Term Wealth

If you’re happy with where you are with your savings and don’t need immediate help with debt, you might consider investing your refund check.

This lump sum can help you build wealth and get you closer to your long-term goals. Here are a few ideas:

If you’re looking for a simple and low-risk way to invest, you could place the money in a Certificate of Deposit.
You can also add your tax refund to a retirement account. If you don’t have one yet, use your refund to start one.
You don’t have to pick a traditional investment option. Your tax money can go toward buying supplies or advertising for a side hustle that will supplement your income.

The best way to invest your tax refund varies based on your unique goals and how much risk you’re willing to take with your money. We recommend getting advice from an advisor if you’re not sure what to do with that money.

Plan What to Do With Your Refund Check With Power Financial Credit Union

Regardless of what you decide to do with your refund check, being intentional about it and planning in advance will help this money work for you.

At Power Financial Credit Union, we make this kind of financial planning easier with personalized banking advice and affordable banking products. From smart savings accounts to flexible investment options, we’re here to help you reach your financial goals.

And if you’re not a member yet, anyone who lives, works, or goes to school in South Florida can join. Contact us online to learn more or visit one of our South Florida branches for personalized banking advice.

FAQs

What’s the smartest way to use my tax refund?

That depends on your goals. Many people use their refund to pay down high-interest debt, build an emergency fund, or invest for the future. The key is to make a plan before you spend it so you can make the most of this extra money.

Should I use my refund to pay off debt or save?

If you have high-interest debt, paying that down first often makes the biggest financial impact. But if you don’t yet have an emergency fund, saving at least part of your refund is a wise first step.

Can I invest my tax refund even if it’s small?

Absolutely. Even a few hundred dollars can grow over time if you invest it wisely. Consider putting it in a Certificate of Deposit (CD), starting a retirement account, or using it to fund a side hustle.