Top 5 Ways to Intelligently Use Your Tax Refund

April 15th is an annual dark day in the lives of many Americans – unless you are getting a tax refund from the IRS! Based on a 2015 IRS report, almost 40 million tax refunds were issued with the average refund totaling $3,120. Sounds nice!

Getting a check in the mail for over $3,000 is always a good day – but remember that money is yours. Uncle Sam has been using it all year and drawing interest on it while you haven’t been able to touch it. Now it is time to make that money work for you.

It is really tempting to grab that check and run down to Best Buy and blow it on a LG 65” 2160p Smart Ultra HD TV. While that will look awesome in your living room, it will do little if anything to increase your net worth. Here are the 5 best ways you can make your tax refund work for you.

#1 Pay Off Credit Cards

Every month you carry a balance on your credit card is a month that you are paying unnecessary interest. According to Value Penguin, the average interest rate on credit cards is 12.51%. Unless you can find an investment that will give you a better APR, every month you carry a balance you are going backwards. If you want to earn over 12% on an investment – then invest in paying off your credit cards.

#2 Create and Emergency Fund

According to a survey released by, 27% of Americans have no savings at all and 50% have less than a three-month cushion. You never know when an emergency will pop up. Why not set aside your tax refund and put it in an emergency fund. You will sleep better at night – guaranteed!

#3 Put Your Tax Refund Towards Retirement

Did you know that 1 in 3 Americans have not saved a single dollar for retirement? Life is not getting any cheaper and it’s going to cost even more to live once you get old enough to retire. You can supplement any retirement accounts you might have through your work by setting up your own IRA. Vanguard can walk you through the process. You can start one with as little as $1,000.

#4 Save for a Down Payment

Would you like to own your own home some day? Who wouldn’t? Now is a great time to start saving for one. If you want to get the best interest rates, then you will need 20% of the purchase price for a down payment. Socking your IRS tax refund into a 12 month CD is a great way to start.

#5 Pay Off Old Debt

Have you checked your credit score lately? Those old debts – like the deposit you owe to the cell phone company or that final internet bill you didn’t pay before you moved – can hang around your neck like a cement block when you want to get a loan (think mortgage for a house). While it is not fun to pay them off, it will help you a lot down the road. Pay off as much as you can and then go out for a dinner and a movie as a reward.

You know the check’s in the mail, now the question is “what are you going to do with it?” Of course, you are welcome to pay your rent in advance! We would love that too!

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