Woman at computer determining what to do with tax refund.

10 smart ways to spend your tax refund

If you're wondering what to do with your tax refund, here are a few ideas to consider.

A tax refund can be used for many things such as tackling debt or investing in your future. Here are some options you may want to consider when deciding how to spend your tax refund.

1. Boost your emergency fund

A good rule of thumb is to save the equivalent of three to six months’ worth of income in an emergency fund. By using your tax refund to either start or increase your emergency fund, you can help prepare yourself to cover expenses in an emergency.

2. Reduce your debt

Consider using your tax refund to help pay down your debt. Focus on the debt with the smallest balance or with the highest interest rate to help reduce your overall debt and pay less on interest/fees.

3. Ramp up your retirement savings

It’s never too early to start saving for retirement. If you've gotten behind in your retirement savings plan, your tax refund might help you get caught up.

4. Contribute to a college fund

You may want to consider using your tax refund to start, or add to, an education savings plan. This can be a great way to get a head start on giving the gift of an education.

5. Invest in yourself

Have you put off continuing education because you didn't have the funds? Your refund might provide a good start toward tuition. You could also make an investment in your health by getting a personal trainer, updating your home exercise equipment or joining a gym.

6. Invest in your future

Consider using your refund to help fund an investment. Over time, investments can grow your money faster than traditional savings account by earning higher returns but can carry higher risk.

7. Improve your home’s energy efficiency

Money you spend on improving the energy efficiency of your home can often have a big payoff in reduced energy bills. In addition, many ENERGY STAR® appliances meet the requirement for a utility company discount.

8. Strengthen your life insurance coverage

If it's been a while since you’ve reviewed your life insurance coverage, it may be a good idea to visit with your State Farm agent to help you determine the right level of coverage for your needs.

9. Support the causes you care about

Find a cause, charity or organization you feel passionate about and donate a portion of your refund to it. Your contribution, added with others, could make a bigger impact than you think and may even be tax deductible.

10. Repair or replace an essential item

Use your refund to help pay for a much-needed repair or replacement of an item such as a furnace or a washing machine.

The information in this article was obtained from various sources not associated with State Farm® (including State Farm Mutual Automobile Insurance Company and its subsidiaries and affiliates). While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. State Farm is not responsible for, and does not endorse or approve, either implicitly or explicitly, the content of any third party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. State Farm makes no guarantees of results from use of this information.

Neither State Farm nor its agents provide tax or legal advice.

Each State Farm insurer has sole financial responsibility for its own products.

State Farm Life Insurance Company (Not licensed in MA, NY or WI)
State Farm Life and Accident Assurance Company (Licensed in NY and WI)
Bloomington, IL

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