Here’s How You Should Use Your Tax Refund

by Maggie Germano / March 15, 2017

It’s tax time! I know I’m probably one of the only people who gets excited about filing their taxes, but I can’t help it. I like to file as soon as I receive my W-2 (which your company is required to send to you by January 31st). It’s nice to know right away if I’m getting a refund and how much it will be. From there, I can start planning what I’m going to do with that money.

Don’t wait until April 14th to file your taxes. Give yourself plenty of time in order to avoid stress and plan ahead.

Wondering where to do your taxes? There are several free tax preparation programs, like Turbo Tax, H&R Block, and a brand new program from Credit Karma. Do you feel like you need help doing your taxes? If you make under $54,000 a year, you qualify for free tax preparation support.

Now, if you’re one of the lucky Americans who receives a tax return, you’re probably wondering what you should do with it.

1. Treat Yourself

It’s recommended that from any financial windfall, you should use 10% of it on yourself. It’s easier to use your money on responsible things if you’re also allowing yourself a treat. Just like it’s easier to eat healthy overall if you give yourself “cheat” days. So set 10% of that tax return aside and do something fun – buy yourself a gift, go out to eat, buy tickets to a concert… Just make sure you put the rest towards your financial goals.

2. Pay down debt

Do you have credit card, medical, or other debt? Throw your money at it!

You have a few options for how to do this:

  • If you have any bills that are in collections, pay them first. This way, the debt collectors will leave you alone, and your credit score can start to repair. Make sure you get confirmation in writing that you have paid off the items in collections. They like to keep harassing you – don’t make it easy for them. Get proof!
  • If you don’t have bills in collections, or you have money left over after paying them off, pay towards your credit card debt. You can either try to pay off your smallest balance first, or pay towards your highest interest card first. It’s really up to you and what might make you feel better.
  • If you have student loan debt, I wouldn’t recommend using your tax refund on that. Student debt is considered “good” debt, so you want to focus on “bad” debt (credit cards, medical debt, etc.) first.

3. Pad your savings

If you don’t have debt, or you want to use a portion of your tax return for savings, you can do that too! If you don’t already have an emergency savings account, this is a great time to start building one. This account can protect you in the event of a job loss, illness or injury, car repairs, etc. It can prevent you from going into debt in these scenarios, and will give you peace of mind. If you already have an emergency fund, you can put money aside to save for other goals. Perhaps you want to save for travel, or a downpayment on a house. Start now!

What will you do with your tax refund? Share with me on Twitter or below in the comments!

This post originally appeared on Maggie Germano Financial Coaching. Want to read more? Check out