While you may not enjoy doing your taxes, receiving a healthy refund makes it all worthwhile. Your immediate impulse might be to use that sudden windfall on something you’ll enjoy. But investing that money with the future in mind may ultimately be the better choice, and you’ll have several different options for making your money stretch further.

Pay off your debt

Eliminating credit card debt is one of the smartest things you can do with your tax refund. Kimberly Lankford, a contributing editor for Kiplinger’s Personal Finance, writes that paying off a high-interest credit card balance is like earning that same interest on an investment. If you’re paying 23 percent interest on your credit card, for example, getting rid of that debt is like getting a 23 percent return on your tax refund.

Matthew Goldberg, a consumer banking reporter for Bankrate, suggests the avalanche method for tackling debt. By knocking down the debt with the highest interest rate first, you’ll save more money over time than you would by starting with lower-interest debt — or the snowball method, as Goldberg calls it. If you don’t have a credit card balance, consider using your refund to save money by paying down student loan debt or personal loans.

Spread the love