Congratulations! You’ve just received your income tax refund (or you soon will).

What are you going to do with this windfall?

Before you rush off and spend it all in the candy shop, take a moment to consider what the best use of this money will be for you and your family.

Here are some ideas to consider:

Pay Off High-Interest Debt

One of the smartest things you can do with your tax refund is to pay off high-interest debt. This includes credit card debt, personal loans and other loans with high interest rates. By paying off these debts, you can save money on interest payments and improve your credit score.

If you have several debts with high interest rates, prioritize them based on the interest rates. Start with the debt that has the highest interest rate and work your way down the list.

Build Your Emergency Fund

An emergency fund is a savings account that you can tap into in case of unexpected financial hardship, such as job loss or a medical emergency.

Aim to save at least three to six months’ worth of living expenses in your emergency fund. If you already have an emergency fund, chances are you could always stand to add to it.

Invest in Your Retirement

Investing in your retirement is always a smart way to use your tax refund. Consider making a contribution to your retirement account, such as an IRA or 401(k).

If you have a traditional IRA or 401(k), your contributions may be tax-deductible. If you have a Roth IRA or Roth 401(k), your contributions are made with after-tax dollars, but your withdrawals in retirement will be tax-free.

The earlier you start investing in your retirement, the better. By taking advantage of the power of compounding, even small contributions can grow significantly over time.

Invest in Yourself

Another way to use your tax refund is to invest in yourself. Consider taking a course or workshop that will help you develop a new skill or advance your career.

For example, you could take a coding course to learn how to build websites or develop software. Or, you could take a public speaking workshop to improve your communication skills. Investing in yourself can pay off in the long run, both professionally and personally.

Treat Yourself (Within Reason)

While it’s important to be responsible with your tax refund, it’s also OK to treat yourself to something you’ve been wanting. Just be sure to set a budget and stick to it.

You could use your tax refund to go on a weekend getaway or buy a new piece of technology you’ve been eyeing. Just make sure that you’re not overspending and that you’re still meeting your financial goals.

Save for a Down Payment

If you’re planning to buy a house in the near future, consider using your tax refund to save for a down payment. A down payment is the amount of money you pay upfront when you buy a house. The more you can put down, the lower your monthly mortgage payments will be.

Saving for a down payment can take time, so every little bit helps. Even if you’re not planning to buy a house in the near future, it’s still a good idea to start saving for a down payment early.

Give to Charity

Finally, consider using your tax refund to give to a charity or non-profit organization that you support. Not only will you be doing good for others, but you may also be eligible for a tax deduction.

When choosing a charity to donate to, make sure that it’s a reputable organization that aligns with your values. Do your research to make sure that your donation will be spent responsibly.



No matter what you choose, the important thing is that you take the time to consider your options. Then spend your tax refund in the way that works best for you!