Don't Blow It: 9 Smart Uses for Your Tax Refund

Don't Blow It: 9 Smart Uses for Your Tax Refund

Woman making a mobile check deposit with smartphone

You've finished your tax returns and discovered you'll be receiving a nice refund. You're not alone: The IRS reported an average tax refund of $3,539 in 2015. But before you dream up ways to spend that money, think of how helpful this "extra paycheck" could be. Here are nine ways to use your refund wisely:

  1. Boost your emergency fund. Experts recommend stashing the equivalent of three to six months' worth of income in an emergency fund. If your account is low, has been depleted or doesn't exist yet, your refund could help you cover expenses in an emergency.
  2. Pay off your debt. Whether you're making payments on a car loan, education loans, a mortgage or high interest credit cards, use your refund to make a dent in what you owe.
  3. Ramp up retirement savings. If you've gotten behind in your savings, your tax refund might help you catch up. Not only that, you'll get to enjoy watching how far that money can go when it's accruing interest.
  4. Start or add to a college fund. Start or add to a college fund. Even if your kids are young, those college tuition bills will be arriving before you know it—and they'll likely be larger than you expect. Seek out an education savings plan and get a head start on your child's education.
  5. Make an investment. Consider putting your refund money to work for you. 
  6. Improve your efficiency. Investing in home improvements can pay off in reduced energy bills. For example, replacing an old refrigerator with a new ENERGY STAR®-rated unit can save you $200 to $1,100 over the lifetime of the appliance. Some energy-efficient upgrades may help you get a discount from your utility company as well.
  7. Bolster your life insurance. If it's been awhile since you reviewed your insurance coverage, you may find you're underinsured. Your State Farm agent can help you determine the level of coverage that's right for you.
  8. 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. (Even better: Earning a higher certification could lead to a raise or promotion!) You also could make an investment in your health: Get a personal trainer, update your home exercise equipment, or join a gym.
  9. Be generous. Find a cause or organization that you feel strongly about and donate a portion of your refund to it. Your contribution, added to others, could make a bigger impact than you think.

Disclosures

State Farm (including State Farm Mutual Automobile Insurance Company and its subsidiaries and affiliates) is not responsible for, and does not endorse or approve, either implicitly or explicitly, the content of any third party sites hyperlinked from this page. State Farm has no discretion to alter, update, or control the content on the hyperlinked, third party site. Access to third party sites is at the user's own risk, is being provided for informational purposes only and is not a solicitation to buy or sell any of the products which may be referenced on such third party sites.

Securities are not FDIC insured, are not bank guaranteed and are subject to investment risk, including possible loss of principal.

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