Financially Smart Ways to Use Your Tax Refund

The following strategies can stretch your refund and help improve your financial situation for the rest of the year — and even longer. Even if you are not in the position to do all of these things, just doing one of these will help put you on the track to financial stability.

Pay down credit card balances, and high-interest debt. Credit-card interest rates continue to be high, and paying off high-interest cards should be a top priority. Having balances over 30% of your credit limit can actually decrease your credit score, so get those balances down as much as possible. Plus paying off high-interest cards can be one of the best investments you can make right now — using your refund to pay off a balance with an 18% interest rate is like earning 18% on your investments.

Get current on any past due bills—including payday, and/or cash advance loans. Tired of late notices and debt collector phone calls? Avoiding them doesn’t make them go away; it simply prolongs the collection process. Unpaid collections are one of the worst things for your credit score. Use your tax refund to take care of those late bills. Your credit score will thank you and you’ll thank yourself for finally getting rid of annoying collectors.

Make an extra loan payment
If you have a mortgage or auto loan, each extra payment you make reduces the life of the loan and the amount you pay in interest. Overall, you’ll end up paying less than if you hadn’t made any extra payments. Depending on your loan amount and interest, making just 1 extra payment a year can cut YEARS off your mortgage and save you THOUSANDS—check out the amortization calculator on

Home Improvements Invest in your home. Now is the perfect time to take your refund to help build wealth by putting value in your home by making improvements and repairs.

Build up your emergency fund. It’s essential to have extra cash on hand so you don’t land in high-interest debt when you have unexpected expenses Try to keep at least six months’ worth of essential expenses in an easily accessible account. Your tax refund can be a great source of extra cash to bolster your emergency fund — or refill it, if you had to tap the money during the tough economic times over the past few years. Putting your refund away for a rainy day is a wise decision. It keeps you from having to use your credit card whenever a financial emergency arises. Since so many debt situations stem from unexpected expenses, starting an emergency fund will give you some of the protection you need to ward off debt.

Treat yourself.
How fun would life be if you only spent your money on bills? It’s ok to spend money leisurely, but remember, there’s a balance. The key is to take care of your responsibilities first, then enjoy your money second. Sock money away for that summer family vacation. Or take a fun quick weekend getaway. Do something fun—you earned it.


About jenniferhamby

Jennifer Hamby, Executive Vice President of My Credit My Future, has worked in the financial sector since 1996. She is dedicated to educating consumers on financial education and responsibility. Having worked in Data Facts’ Nashville office since 2007 as an account executive, Hamby realized the need for financial education that was informative, yet easy to understand and attainable. Partnering with both Junior Achievement, and Tennessee Jump$tart, in providing financial education, opened her eyes to the tremendous benefits in providing financial literacy and resources for consumers to aid in making better financial decisions.
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