You pay a debt to Uncle Sam with every paycheck throughout the year, so when you get a tax refund, it is best to spend it wisely. The average tax refund amount is rising, and the extra money can be used to give you a jump-start on safeguarding your financial future. Instead of springing for a trip to the beach or a new flat screen television, think about spending your funds on something that will give you an even bigger bang for your buck.
Add to Your Emergency Fund
When getting credit was a piece of cake and the job market was thriving, living paycheck to paycheck may not have been so terrible, but having a solid emergency fund is absolutely essential today. Put your tax fund in a savings account dedicated solely to emergencies, and aim to save up enough money to get you through a minimum of three months without a paycheck. That means saving up for food, utilities, your mortgage and any other regular expenses. You'll be so grateful you have those funds if you ever need them.
Relieve Your Debt Load
If you are just making the minimum payment on your credit card each month, you'll spend years getting out of debt, and every purchase you make will end up costing double or triple if your interest rate is high. Make headway on your debt with your tax refund so you won't be paying for last week's dinner out for the next two years.
Invest in your future by spending your tax refund on something that will further your career or develop your skill set. Check out continuing education courses in your area or online or attend a weekend conference to network with others in your industry. For just a few hundred dollars, you can increase your future earning power significantly.
Put Money in Your Retirement Account
It may seem like you have an eternity to save up for retirement, but you don't. Max out your account if it has an employer match and commit to adding your tax refund every year to boost your funds.
Tackle a Project
Maintenance projects are expensive, but they can become even more costly if ignored. Use your tax refund to repair that leaky roof, replace the old tires on your car or buy an energy-efficient furnace. If you make changes that boost your home's energy efficiency, you may be eligible to earn a federal tax credit in the following year.