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What to Do With Your Tax Return

Pay Off Credit Debt

With credit card interest skyrocketing, paying off or paying down credit card debt can drastically improve your financial situation. You'll save on the months of interest you would have paid. You'll also reduce or eliminate your monthly payment, freeing your money for other things.

Create an Emergency Fund

Financial advisers are fond of recommending an emergency fund that can carry you and your family through 1 to 3 months of your living expenses in the event you lose your job or your income is otherwise interrupted. This is large amount of money and is difficult for many to put together without a windfall like a tax refund.

Education

Set up a college fund for your children or grandchildren. Go back to school and improve your own job skills. In either case, you'll be making an investment in the future. Even simple things like a continuing education class in your field is a great way to use your tax refund for education.

Evaluate Your Mortgage

You can prepay your mortgage which can reduce the amount of interest you pay over the course of the loan. If you have a higher interest rate, refinancing the loan may be to your advantage and your refund could cover the costs of refinancing. Taking care of this when you have extra money is better than waiting until it becomes a financial necessity.

Home Repair or Upgrade

Many home repairs are costly, putting them beyond economically-stressed homeowners' reach. Some repairs such as adding insulation can have tax benefits for next year. Keeping your home in good repair can reduce other operating costs and protects one of the largest investments you own.

As you can see, there are many great things you could do with your tax return if you get one. You can use this as a much-needed opportunity to put away some savings or pay off something you've been working on for awhile. When you take advantage of this opportunity and use it smartly, it will pay off in the long run.

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