If you’re really on top of things and heed the identity theft-prevention advice to file your tax returns as early as possible, you may have already received and spent your tax refund.  Good for you!  We’re still waiting for our refund, because newborn (and, let’s be honest, because of the same procrastination that hits every tax season).  Of course, not everyone gets a refund.  Last year, we were in that camp and had to pay the IRS — not a fun surprise.  But the average federal tax refund is $2,895, and for many Americans who don’t get annual or quarterly bonuses from their employers, it’s their only unbudgeted monetary windfall.

No matter your current situation, a couple thousand dollars can go pretty far in helping you to achieve your financial goals.  As I mentioned last month, I’m making an effort to buy fewer things, and I don’t want to watch my tax refund dollars evaporate in a shopping spree, spent on things that will just further fill my house, only to be discarded in a future decluttering effort.  If you’re in the same boat and are looking for some more intentional uses for your hard-earned money, here are a few ideas. 

1. Pay down debt.  If you are carrying high-interest debt, like credit card debt or a personal loan with an interest rate of more than a few percent, you should probably put at least some of your refund toward paying down the debt.  Doing so could save you a significant amount of money in the long term.  As for lower-interest debts and things like student loans and mortgages, whether you choose to pay those off early depends on other details of your financial picture and your psychological and moral tolerance for debt.
2. Build your emergency fund.  It’s important to have enough money in liquid savings to avoid going into debt when an unexpected event occurs.  The usual advice is that your emergency fund should amount to at least three to six months’ worth of expenses because it can take at least that long to find a job if you lose yours, but that figure can be daunting for many people.  It may not be necessary or wise to save so much, especially if you are carrying high interest debt.  An emergency fund of $1,000 or so should be enough to help you cope with things like emergency household or car repairs or medical coinsurance without needing to incur more credit card debt.  If you are debt-free, you might consider stashing away more money for a rainy day.  A friend of mine has something he calls an “f-you” fund that’s intended to enable him to quit his job if things ever became unbearable — not a bad idea.
3. Travel.  I’m a big believer in the transformative power of travel, as well as the restorative benefits of taking a vacation.  Use your refund money to go somewhere you’ve never been before, explore a different culture, and make memories you’ll have for the rest of your life.  Spending on experiences makes us happier than spending on things, and traveling brings with it all sorts of amazing experiences.
4. Catch up on deferred maintenance.  Have you been putting off certain repairs to your home, car, or even yourself because they’re expensive and not terribly urgent?  As an example, parts of my driveway are cracked and crumbling, and I know I’m going to need to get it fixed at some point.  It’s not the kind of thing that needs to be done right now, and it will probably be fairly costly, so I haven’t done anything about it yet.  That type of project can be good to tackle when you get a windfall like a tax refund.  You can use the money to check the item off your long-term to-do list.
5. Save for retirement.  Most Americans don’t save enough for retirement, and a significant number of us haven’t set aside anything at all.  The future of social security is uncertain, and there’s a good chance you won’t receive enough of a monthly payment to cover all of your expenses in retirement.  Saving for retirement can reduce your taxes for the 2018 tax year, depending on the kind of savings vehicle you use.  If you’re behind on saving for retirement, consider investing some or all of your refund for that purpose.
6. Invest it for a child’s education.  Each state has its own 529 plan (or plans) that allow parents, grandparents, and others to save for a child’s education while gaining some tax advantages.  You don’t have to use the plan sponsored by the state in which you live; anyone can set up an account in any state’s plans (though there may be state income tax benefits to  using your own state’s plan — check with an accountant about that).  The price of higher education continues to increase, so if you want to give a child you know the chance to obtain a college degree without incurring boatloads of debt, stashing your refund in a 529 plan is a great idea.  Read more about 529 plans here.
7. Start a business.  Have you been dreaming of turning your hobby into a side hustle or becoming your own boss?  Use your refund dollars to cover start-up costs and start working toward making your dream a reality.
8. Take a class.  Do you need an additional credential to further your career or switch careers?  Or is there some skill you’ve always wanted to learn or topic you’d love to explore in greater depth?  Consider using your refund money to pay the tuition for a class.
9. Be an angel.  Angel investor is a term often used to describe people who contribute large amounts of capital to entrepreneurial ventures, but the term can apply to small-time investors too.  An angel investor usually invests not with the primary purpose of obtaining a high financial return on her investment, but to further some other social good, such as giving a boost to an entrepreneur from an underrepresented group or funding a venture that might not be hugely profitable, but has the potential to affect important change.  If you have no interest in starting your own business, you might consider investing in a promising start-up being launched by someone you know in exchange for a partial ownership interest.  (Of course, you’ll want to do your due diligence, and be mindful of the pitfalls of giving money to friends and family.)
10. Donate it.  There are so many nonprofit organizations out there doing important work that need more money.  Think about which causes are meaningful to you and research organizations that are making a difference in that arena.  Helping those in need and contributing to making the world a better place is far more rewarding use of your money than buying a bunch of stuff you don’t really need.

Readers, what do you plan to do with your tax refund? Tell us in the comments.

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