10 Ways To Put Your Tax Refund To Work

by Gary Foreman

Do you typically get a tax refund? Feel bad after you blow it each year? This year, consider one of these ten ways to put your tax refund to work for you.

It’s that wonderful time of year with the beginning of spring, and tax refunds! Most of us look forward to both. But, unless you’re a big time gambler, the tax refund will be the one that has the biggest impact on your finances.

Although the IRS is really just returning your money to you, it feels a little bit like “free” money. And, as free money is prone to do, it often just disappears once you get it. So if you’re tired of feeling bad after your tax refund disappears, consider one of these ten ways to put that tax refund to work for you.

1. Make your home more energy-efficient.

You’ve been complaining about your heating and cooling bills. This is your chance to add some insulation or install new energy-efficient windows. You’ll see a payback every time you open your utility bill. And, you might even get a tax credit or rebate to cover part of the expense.

2. Invest in additional education.

The labor market keeps changing. Old skills are becoming obsolete. New skills are required. Your tax refund could pay for a course to increase your skillset and make you more valuable as an employee. The new skills might help you keep your job or even get you a raise!

3. Pay off student loans.

Americans owe nearly $1.75 trillion in student loan debt. Many are in deferment or forbearance, which means that they’re not currently being repaid, but are still adding interest to the balance. If you owe student debt, this could be your opportunity to take a chunk out of that balance.

4. Invest in your health.

Even if you have good medical insurance, bad health can be costly in medical bills, lost time, and lost wages. Use your refund to join a weight loss or smoke enders program. Or join a health club and begin working out regularly.

Related: When Financial Goals and Health Goals Collide

5. Invest in a new career or business.

Many of us work in jobs that aren’t going anywhere and never will. Use your refund to start a small home business or pay for classes that lead to an entirely new career.

6. Start an IRA.

The money you put in an IRA is tax-deductible. Too many of us get to tax time and fail to fund an IRA because, well, we have a failure of funds! Don’t wait until next tax season to find money for your IRA. Use this year’s tax refund, and you’ll increase the size of next year’s refund. Plus, you’ll have additional money available for your retirement.

7. Offset the pain of recent price increases.

Rising food and gasoline prices have thrown many family budgets into turmoil. You can’t stop eating or driving to work. Use your refund to buy prepaid cards that will only be used for gas or food. Unless there are significant further prices increases, you should be covered for the balance of the year.

8. Earn money on your credit card forever.

Suppose that you continually carry a balance on your credit card. Further, suppose that you used your refund to pay down the balance. At a typical credit card interest rate, that could be like getting several hundred dollars every year!

9. Invest in a pantry.

There are some grocery items that you know you’ll use. Use some of your refund to stock up when those items are on sale. You’ll reduce future grocery bills.

Related: Buying in Bulk: An Investment Anyone Can Afford

10. Create an emergency fund.

Sooner or later, you’ll have an unexpected expense. Typically they end up on your credit card, and you take months to pay them off. With money set aside for unforeseen expenses, you’ll avoid the interest expense and be able to save for the next “emergency.”

Related: Easy Ways To Build an Emergency Fund on a Tight Budget

Bonus: Take a vacation.

Ok, this last one isn’t going to pay any dividends later, but if you’re not going to use your refund to further yourself financially, at least you’ll have some memories to enjoy!

Related:

• Vacation Planning That Won’t Break Your Budget
• 10 Smart Ways To Spend Your Hard-Earned Money
• 13 Ways To Waste Sudden Wealth

Reviewed April 2023

About the Author

Gary Foreman is the former owner and editor of The Dollar Stretcher. He's the author of How to Conquer Debt No Matter How Much You Have and has been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, Credit.com and CreditCards.com.