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.