Tax Time: What to do with your Tax Refund Check? [2024]

It’s TAX time! So you are probably waiting to get your Tax Refund Check in the following weeks, as every other American. In some years prior, this tax refund went from $2,791 to $3,176, so this year, we are yet to see how much the average amount for Americans might reach.

We know it could be tempting to use that money all at once to spoil yourself. But we want to help you make the best decision possible about how to use and benefit from it the most.

Now that you know this, here are some smart things to do with your 2023 Tax Refund check.

1) Spend your tax refund check wisely on something that you prioritize

This advice is for the best-case scenario. If you don’t have debts eating you up for now and put some money into some retirement fund. Or even if you already have some money invested or saved on the side, you could feel free to spend it.

But there’s no need to rush. You can still make a good decision here. Pick something that you really really want, like, for instance, a new gaming laptop, or decorate your gaming room. You can even have a well-deserved vacation. But you must just pick one to not waste the money but to be wise about it.

2) Invest it in taking control of your future now

Now we enter the second best-case scenario. You don’t have real debts and have saved a good emergency fund. If you don’t feel like spending it on something temporary, you can always invest your tax refund money.

The truth is that saving money is not enough to have a comfy retirement. For that, you must invest. For example, you can earn compound interest by putting as much money as possible into the stock market. Be wise about it, and remember you are going for the long run.

3) Get ahead with your Emergency Fund

For the third best-case scenario, you are still not being eaten up by debts, but that’s mostly it. It is an intelligent decision to fill up your emergency fund. Or start one if you haven’t yet. This is important because if something bad happens and you don’t have an emergency fund set up in place, you will run your debit card and get more debts than you could want.

This fund aims to have your back covered in case of car or home repairs, medical bills, unexpected unemployment, pc/cellphone/console repairs, or other necessities. But we must warn you! More than putting your tax refund money into this fund is required.

It would be best to be disciplined, not expend it on anything that’s not a real emergency, and keep adding funds to it over time. Some experts recommend saving at least three to six months of expenses, so you can be confident that you got yourself covered.

4) Paying debts with your Tax Refund Check

Now we got to one of the worst-case scenarios. You can’t spend, save or invest because you have some pretty important debts. Then it will be wise to use your tax refund money to get rid of some of it. First of all, we are going to divide the debts into two types, low-interest and high-interest.

Let’s say you don’t have so much debt, and its current interest rate is below 5%. Even if you will get more of your check investing than paying this small debt, there’s no better feeling than being debt free and having a clean start. But it is up to you to choose your path.

Now, if your current debt has more than a 5% interest rate, that classifies it as a high-interest rate. It’s money-wise to use your money to try to get rid of those debts as fast as possible. That type of interest rate will end up costing you some serious money. Even investing it will not have as much of an impact on your financial life as simply paying it all up.

Don’t forget that the tax refund filing deadline is April 15th, and it is better to get everything ready as soon as possible.