5 Things to Do With Your Tax Refund

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But when you get a refund, do you make it count? If you’re among the many Americans feeling uncertain about the economy right now, should you change your approach this year? A recent C-Net survey found that paying bills, paying off debt and building savings are the most common priorities among refund recipients this year. And we have some ideas too.

Here are five ways to make the most of your refund.

1.  Pay down (or eliminate) your credit card balance. Carrying a balance from month to month is costly, especially with interest rates near historic highs. And credit card interest compounds daily, so it can get out of hand quickly.

  Paying down that debt is a great way to maximize your refund, especially if you’re only paying the minimum required each month. When you’re done, try creating a budget to help avoid digging a new hole.

2.  Build a financial buffer. If you don’t have credit card debt, shore up your savings so you’re prepared for the unexpected. Having enough to cover three to six months’ worth of expenses can make a huge difference if you lose your job, have a medical emergency, or suddenly need a home repair. And if you put it in a high-yield savings account like SoFi’s, you’ll be capitalizing on interest rates too.

  Note: If you don’t have at least one month’s worth of expenses covered, save your refund — even if you have credit card debt.

3.  Jumpstart your retirement, health, or college savings accounts. Investing in your future is a great way to leverage the potential earning power of your money. And it’s more rewarding when there are tax advantages.

  Put your refund into a traditional IRA to lower your tax burden. Invest it in a Roth IRA or 529 college plan so that your investment earnings and qualified withdrawals can be tax-free. Or, stash it in a health savings account. The money won’t be taxed at all as long as you use it for eligible healthcare.

4.  Pay extra on other debts, like student loans. If you don’t have high interest debt from credit cards or personal loans, consider getting ahead on your student loans, car loans or mortgage payments. You’ll lower your interest burden and be debt-free faster. (There’s no prepayment penalty for paying down federal or private student loans, but check with your lender on other types of loans.)

5.  Live a little. (Just a little.) Occasional rewards can keep you motivated, and even improve your chances of achieving your financial goals. If you’re tempted to splurge because it’s been a while since you’ve treated yourself, try borrowing from the popular budgeting rule that suggests allocating 30% of your income to “wants.”

  Use 30% of your refund for tickets to that concert or a weekend getaway and put the rest toward a financial goal. Savor the experience knowing that you’re having fun and making your money count.

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