5 ways your tax refund can get you ahead financially

Jan 2024 tax season w2
OCCU  -  01.23.2024

Getting a tax refund? Lucky you! Congratulations!

Now the fun part — deciding how to spend those Benjamins.  But before you start checking off your Amazon wish list, ask yourself this: What’s the most important thing you can do to move forward in life this year? Do that with your refund instead. 

Want to know how financially savvy people spend their tax refunds? Here are five smart ways to use that check from the IRS: 

1. Hit the reset button. 

If you’re behind on bills, catching up on missed payments is the best thing you can do right now. Your tax refund can give you a financial do-over so you can start fresh this spring without any ominous letters or phone calls. Think of all the money you’ll save on interest and late fees. 

2. Start a stash. 

Nearly one in four U.S. adults have no emergency savings. We get it — it’s a struggle to save when you’re barely making it, and even when your head is above water, it can be hard to prioritize emergency savings. But your tax refund? Boom —instant safety net. Even having just $1,000 in savings can get you through everything from a tight month to a sudden crisis.

3. Deepen your pockets. 

If you want to live large, you gotta do what rich people do: invest. Did you know the government will actually pay you up to $1,000 to invest your tax return? If you make less than $54,750 (as head of household), you can deduct up to 50 percent of the first $2,000 you save in a retirement account, like an IRA or your employer’s 401(k). That could mean an even bigger refund next year — plus your money will keep on growing. 

4. Climb out of the hole. 

Got debt? Your tax refund can make a decent dent in it. Pay off a small debt completely and that’s one less monthly payment to worry about this year. Or focus on your account with the highest interest rate — usually a credit card or student loan — and save yourself some interest. 

5. Work for yourself. 

If your goal is to be your own boss, this can be the boost you need to get started. The average tax refund is around $2,800. If you’ve got a home-based micro-business in mind, that’s some solid seed money.

For many of us, our tax refund is the biggest chunk of money we see all year. Why not use it to set yourself up for financial success?