What can I do with my tax refund? A guide for your current, short term, midterm, and long term money goals

It’s not every day a financial boon comes your way. Tax refund season is an opportunity to create some breathing space in your budget, improve your financial situation or treat yourself to something that will improve your quality of life.

After the challenging times we’ve all had, it feels especially important right now to use your tax refund strategically to put you in the best possible financial position for the coming year. But what does that mean for you?

When it comes to your tax refund, there’s no one-size-fits-all approach. The most strategic use of your bonus money depends entirely on where you are in your financial journey. Maybe you’ve got pressing financial needs that need taking care of ASAP. Or maybe you’re fine for the moment but could use some help meeting a goal on the near horizon. Or perhaps you’re at a point in your financial planning where you’re focused on long term.

Whatever your situation, we’re here to help you make the best possible decision for you and your household. We’ve got tips and tools to help you maximize the impact of your tax refund while using it to promote your overall financial wellness.

The now: present money goals

Before you make any decisions about your tax refund, give yourself a moment to pause and reflect. Begin by taking an honest look at your financial situation. Do you have any immediate needs that require attention?

If you’re not sure, consider getting in touch with our team to talk through your options. We can sit down with you, go over your current money plans and help you consider whether you might need to make any adjustments.

Urgent or immediate uses for your tax refund might include:

• Taking care of an unexpected cost.
• Paying off a line item or expense to create more space in your budget.
• Building up your savings.
• Paying down high-interest debt.

Short term money goals (1-3 months)

If you don’t need the money right away, consider depositing your refund into an interest-earning account while you figure out what to do with it. Our Remarkable Checking account pays interest on your balance while keeping your funds instantly accessible for when you’re ready to use them. Or if you plan on holding onto your refund a little longer, stash it in an Ignite Savings account to earn maximum interest and grow your funds as much as possible in a short amount of time.

Now consider whether you have any short-term needs to address. While saving your money is always prudent, financial wellness isn’t just about increasing the size of your bank account. It’s also about making choices that promote your day-to-day happiness. Sometimes the best thing you can do for your financial wellness is to treat yourself to something that gives your happiness a boost. For example, you could:

• Buy something for your home that will improve your quality of life.
• Spend the money on an enriching experience for yourself or quality time with loved ones.
• Donate to your favorite cause or charitable organizations.

Midterm money goals (3-13 months)

If your short-term needs are already taken care of, the next step is to look ahead to the coming year. Have any goals on the horizon that could use a boost? With extra time to plan, you can take advantage of high-yield deposit accounts to earn additional interest on your tax refund.

For example, with a six-month Certificate of Deposit (CD) you can grow your money faster and still have access to your funds by the time you need them. Or if you have at least $500 to deposit, you can open a money market account to earn more interest without tying up your funds at all.

Our high-yield deposit accounts can help you save up faster for your midterm goals, such as:

• Building up your emergency fund.
• Preparing for an upcoming trip or vacation.
• Saving up for home improvements.

Long-term money goals (1 year or more)

Don’t have any pressing goals for the coming year? Consider how you can leverage your tax refund to build a better future for yourself. Look at your long-term money goals and assess your future needs to determine the most effective way to use your bonus funds.

First, evaluate whether you have any lingering items on your long-term to-do list. For example, perhaps you’ve been meaning to increase your insurance coverage, roll over a previous employer’s 401k, or merge accounts. Consider whether your tax refund can help you check any of these items off your list.

Next, choose a long-term goal you’ve been meaning to get around to and make this the year you start working toward it. For example, you might want to:

• Invest your money or augment your retirement plan. Find out how we can help formulate an strategy that works for you.
• Make that business idea you’ve been thinking about a reality — or grow your existing business. Our Member Business Services can help you at every stage of business growth.
• Save for a down payment on a home or to cover your moving costs. Contact our mortgage lending team to determine the right home loan for your needs.
• Save for a new vehicle or other big-ticket item. Our indirect/vehicle loans offer competitive rates and terms.

No matter where you are financially, there are plenty of ways you can use your tax refund to improve your financial wellness. With a little strategic planning, you can use these extra funds to strengthen your financial position for the coming year and beyond.