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10 Smart Ways to Spend Your Tax Refund

With your taxes finally out of the way, you can now eagerly await the arrival of your tax refund check. There's a good chance that you have already made some plans for that money. While it may be tempting to take that check and blow it on expensive things you've had your eyes on, you should really take a step back to think about whether or not that is really such a good idea. Here are 10 smart ways that you can use your tax refund and really get the most out of your money.

1. آ Pay Down Existing Debt

High interest debts, such as credit cards or student loans, can be a real drain on your bank account each month. Sure, using some of your tax refund to pay down some of that debt isn't as much fun as splurging on a new entertainment system, but paying down some of the principal on your existing high interest debts now can lessen your future payments, leaving more left over in your account at the end of the month.

2. آ Build on Your Emergency Fund

One single surprise expense can quickly send you spiraling down the road to financial ruin. Having an emergency fund can save you from that scenario. It is recommended that you have at least 3 to 6 months' worth of salary stashed away (if not more). Whether you are just starting an emergency fund, or you haven't been able to contribute to your current one as much as you would have liked to, your tax refund is the perfect opportunity to add a substantial amount.

3. آ Individual Retirement Accounts

Even if you have a 401K through work, having an individual retirement account (IRA) set up is still a good idea. You can contribute up to $5,500 every year ($6,500 if you are over the age of 50) so long as your income is below $114,000 if you are single or $181,000 if you are married filing jointly. Having that money socked away is something you will be grateful for when it's finally time to retire.

4. آ Investment Accounts

You can use some of your tax refund to buy shares in a mutual fund or stock. With the help of a good stock broker, a brokerage account is a great way to really make your money work for you. There are plenty of affordable brokers who work efficiently for smaller investors like yourself.

5. آ Home Improvements

If you have been watching home improvement shows, or pouring over magazines, dreaming of updating your kitchen counters, replacing your floors or redoing your bathroom, you may want to consider using your tax refund to make those improvements on your home. Minor home improvements don't cost a lot, but they can really boost the appearance of your home. As an added bonus, home improvements increase the overall value of your home.

6. آ Items that May Soon Need Replacing

It always seems like something is on its way out. Whether you have an outdated refrigerator, an old washer and dryer, or your car needs new tires, use your tax refund to fix something before it breaks or replace it altogether. Doing so now will save you the stress of having to scramble when the inevitable finally happens.

7. آ Start a College Savings Fund

College can be expensive, and trying to save for your child's education while trying to save for retirement (and possibly still paying off your own college debt) can seem impossible. Even if your children haven't even stepped foot in elementary school yet, the time for looking at schools will be here sooner than you think. Your tax return is a great opportunity to open, or contribute to, a 529 account. You can use the money tax-free for college education bills and you may be eligible for a state income-tax deduction for that contribution.

8. آ Invest in Yourself

If there has been a class at the local college you've been wanting to take, consider using your tax refund to invest in yourself. You can learn a new skill simply because you want to pick up a new hobby, such as cooking or sewing. By doing something you enjoy, you can greatly improve upon your quality of life. Some skills can even help save you money. For instance, if you cook at home more, you won't eat out as often. Or, you can take a class that can improve upon your current job skills, which can help you to get ahead in your career.

9. آ Donate to Charity

If there's a charity that is close to your heart, such as the local animal shelter, but you haven't been able to donate like you've wanted to, your tax refund can finally give you the opportunity to do so. Not only will you help a great cause, but you will feel good that you contributed. Donating also comes with a karmic effect; your donation will be tax deductible when tax time eventually rolls around again next year. Just be sure to hang on to all of your receipts.

10. آ Save for Something You Really Want

What good is a tax refund if you can't have at least a little bit of fun with it?آ  After you've taken care of your immediate expenses (credit card debt, student loans, etc.), and added a little to retirement and/or college savings, take what's left and add to a separate savings account that you use specifically for something you really want, such as a new car, an entertainment system, or a dream vacation.

While there's nothing wrong with treating yourself a little bit with your tax refund, there is no reason to spend the whole check on things. Instead, consider making your money work for you, and your family, helping to make your financial future a little bit easier.