2 Smart Things To Do With A Tax Refund & 2 Things To Avoid

If you ask any American, they will tell you that the tax season is the most dreaded moment. Everyone tries to pay their fair share of taxes to avoid trouble with Uncle Sam because it's never a good experience.

After everything has settled, individuals eligible for tax refunds can have some consolation, in tax refunds, with some receiving a significant amount. For most people, money paid in taxes is considered spent, and refunds feel like a windfall.

As a result, most people are tempted to spend on things they do not need. But you could choose the opposite and do something with it that will benefit you in the long run.

This guide highlights some smart and not-so-smart things you can do with your tax refund.

Smart Things to Do

1. Pay off Debt

A tax refund doesn't mean you have everything working out for you. The best use of a tax refund would be fixing the areas of your finances that weren't doing well, for example, by paying a debt.

You can repay any type of loan with your tax refund, including personal, car, or student loans. You can also use it to offset your credit card balance.

If you want a good credit card option, consider getting one from a reputable company such as SoFi. The reason why SoFi is a good credit card issuer is mainly due to the numerous perks they offer, including cash back, anti-fraud protection, and free credit score monitoring.

2. Save It

You can never go wrong with saving your money because you can always access it in the future when you need it the most. There are several options for savings, the most important being saving for the unexpected. Even when you have set aside money for that, there is no harm in having extra.

Another option would be saving up for a project you wish to undertake or, better yet, saving for retirement. Imagine the amount of money you can accumulate over the years if you put all your tax refunds into your retirement account. You do not have to be limited to saving for the option listed here. As long as you are saving for something, it is a smart use of your tax refund.

Things to Avoid

1. Splurging or Shopping

Spending the tax refund windfall is almost always the first go-to idea for recipients. But before spending the refund on things you do not need or that will lose value in the long run, consider that the refund was your hard-earned cash in the first place, so you are only getting back what belonged to you.

So if you have not planned for a vacation, road trip, expensive jewelry, or new vehicle, don't start planning after getting the refund.

2. Get into Gambling

On Feb 6, 2023, Becky Bell of Auburn, Washington, learned that she had won a $747 million jackpot, the second largest win in the history of America. Such news makes everyone think it could be them next time.

Only one person gets to win such figures, and a few others get smaller figures. But the majority of gamblers walk off the table with empty pockets. So do not let the allure of a big win cost you all your returns. If you must gamble for fun, set aside a small amount but spend the rest in a manner that will offer value in the long run.

Final Words

The dos and don'ts of tax refunds mentioned in this guide are just a guide, not rules set in stone. At the end of the day, you have to make the decision yourself. But making the right decision helps ensure you put your refund to good use, considering it is your hard-earned money.