8 Responsible Ways to Use Your Tax Refund This Year
If you know when tax season is, you probably also know that filing your tax return often leads to a tax refund a few weeks later. The size of your tax refund depends on a huge range of factors—including how much money you made last year and how many dependents you have, if any—but many people receive at least a little money each year.
If you’ve received a tax refund in the past, you know how that money can feel like a pleasant surprise or a bonus. According to a new survey from NerdWallet, people expecting a 2019 federal tax refund this year predict they’ll receive $2,207, on average; that’s a solid chunk of no-strings-attached cash.
In prior years, you may have treated your refund (whatever its size) as a surprise gift and spent it on a vacation or a big purchase you otherwise wouldn’t have been able to comfortably afford. If that was you, it’s time for a hard truth: Treating your tax refund as a total windfall you can spend on whatever you want isn’t a good financial decision. (And that’s ignoring the fact that the money is technically a result of you overpaying on taxes throughout the year.)
They may not be glamorous or exciting, but there are smart, responsible ways you can put your tax refund to work for you—ways that can actually earn you even more money or otherwise set you up for future financial success. If you can resist the impulse to spend your tax refund on unnecessary splurge items, you can make some positive money moves; it just takes a little restraint and some financial know-how.
Even if you feel pessimistic about the likelihood of receiving a tax refund this year—NerdWallet’s survey found that only 51 percent of filers expect an income tax refund at all—it doesn’t hurt to think about what you might do with a refund. This could be the year you straighten out your finances, after all, and one (or several) of these smart uses for your tax refund could be the first step.