11 Powerful Money Moves to Make With Your Tax Refund

Tax season. To many, this is their favorite time of year. To others, not so much.

If you deducted more than was needed from your pay throughout the year, tax season can deliver one of the biggest annual "bonus checks" you might receive — even though it's not technically a bonus since it's your money you're getting back in the first place.

Going through the actual process of filing your taxes can be tedious, but if you end up receiving a refund once it's all said and done, it can be exciting to think about how to use the money. It's easy to daydream about taking an exotic vacation, buying a new TV, or splurging at your favorite restaurants, but are those the best ways to make money moves?

Instead of splurging on something you want, consider putting your tax refund towards something you need — or better yet, toward something that can help improve your overall financial situation.

That's not to say there isn't room for a bit of both fun and responsibility – there are plenty of ways to incorporate both. But planning ahead before you receive your tax refund can help you avoid the temptation to spend it completely frivolously.

To help you decide on the best way to allocate your refund, here are 11 powerful moves to make with your tax return before that money starts burning a hole in your pocket.

Fund a retirement account

It's impossible to know what the future holds, but one thing is certain — having money grow passively in the background for whenever you need it is probably a good idea. Getting into investing can be intimidating, but modern technology is making it easier to make this valuable financial move.

Stash¹ <p>Paid non-client endorsement. The paid partner received cash compensation of up to $150.00 (per cost per action) for providing this endorsement. Compensation creates an incentive for the individual to recommend Stash. Endorsements are not representative of the experience of all clients and are not guarantees of future performance or success. For a representative sample of client testimonials, refer to Apple App Store or Google Play reviews To begin investing on Stash, you must be approved from an account verification perspective and open a brokerage account (“Personal Portfolio”). Promotion offer is subject to <a href="https://lp.stash.com/personal-portfolio-5-first-deposit-offer-promoter/" target="_blank" rel="noopener noreferrer">Terms and Conditions</a>.</p> <p>Investment advisory services offered by Stash Investments LLC, an SEC registered investment adviser. This material has been distributed for informational and educational purposes only, and is not intended as investment, legal, accounting, or tax advice. Investing involves risk.</p> is an investment tool known to be especially user-friendly for first-time investors. It's easy to sign up, and you can add money to your account as little or often as you'd like in increments that make sense for you. With as little as $1, you can start investing and building your portfolio. You can even learn a thing or two about investing along the way.

Though all investments come with risk, when you start as early as possible and with whatever money you can, you'll have more time on your side to potentially grow your portfolio. Using your tax refund to invest in your future could be a wise choice no matter how much it is. As we mentioned, even just $1 is enough.

Invest in real estate

If you've always wanted to invest in real estate but weren't sure where to start with limited funds, Diversyfund might be what you're looking for. It's simple to set up an account with this online real estate crowdfunding platform, and you can buy into its crowdfunded REITs and invest in multifamily commercial property with as little as $500, though the average investment is around $2,500. Even still, that average is a relatively low barrier to entry when you consider the high cost of purchasing commercial property on your own. 

If you're expecting a decent tax return this year and you're interested in how to invest in real estate, this could be a great place to start. According to the Diversyfund website, its goal is to generate a 10% to 20% return on the properties it buys. Although all investments come with the risk of loss, there's also potential to see generous returns with Diversyfund. 

Start building an emergency fund

What would you do if you found yourself in a position with no income or considerably less income all of a sudden? Putting money aside in an emergency fund will give you peace of mind that you'll be able to cover your costs should something unexpected occur.

Experts will tell you to save up enough money in your emergency fund to cover at least six months of living expenses. While that's solid advice, even a little bit helps and is better than nothing at all. If you don't have any savings set aside for emergencies, consider starting with your tax refund. It might not be fun, but it's responsible and you'll be glad for it when you need it.

Purchase insurance coverage

Have you been meaning to apply for life insurance, but putting it off due to concerns about the application process or cost? If so, you might consider using a portion of your tax return to cover a life insurance policy. 

While applying for life insurance coverage used to be complicated, modern technology has made the process much simpler. Some of the best life insurance companies now allow you to complete an application and get quotes for term life policies in a matter of minutes. In some cases, you might not even need a medical exam to get coverage. And the best part? It's probably much more affordable than you think.

Start a college fund

According to a recent U.S. News survey, the average cost of tuition and fees at a private college for the 2022-2023 school year is a whopping $39,723. If that number gives you sticker shock, you're not alone. Discover recently reported that nearly 70% of parents are concerned about how they'll pay for their child's college education. 

If you're worried about paying for college down the line, consider using a portion of your tax return to contribute to a tax-advantaged 529 or Educational Savings Account. Starting a college fund when your child is young can help give you some peace of mind that you'll be able to help with a portion of these costs when they reach college age.

Say goodbye to credit card debt

Credit card debt has some of the highest interest rates attached to it, so using a portion of your tax return to pay down your balance (if you have one) could benefit you in the long run. Even if you can't say goodbye to your debt completely, paying it down is definitely a step in the right direction and will feel like a weight has been lifted off your shoulders.

Invest in yourself

Maybe you've been dreaming about taking a course or learning a new skill that will help you further your career, but you just haven't had the extra cash to make that dream come to fruition. Whether you want to brush up on your professional knowledge or learn a new language, your tax return could help you invest in yourself. Consider using a portion of it to further your knowledge and skills this year. Who knows? It might give you the confidence you need to finally apply for that dream job.  

Make home improvements

Maybe your house could really use a new roof or you've been dreaming about updating your outdated bathroom. Whatever it is, using a portion of your tax return to make some much-needed home improvements might be a decent investment for you. And depending on the improvements you decide to make, that investment might pay off down the line when you decide to sell your home. It could also help you avoid dipping into your savings to cover those costs. 

Go halfsies: half fun, half responsible

Make your mama proud (or whoever you're trying to please in life) and consider indulging in something fun by going halfsies with your tax return. It's a win-win decision and allows you to enjoy some of your hard-earned money while also being financially responsible.

Some ideas to consider:

• Throw half into your Roth IRA, then pounce on an airfare sale to your favorite vacation spot
• Get new tires and an oil change for your car, then go on a road trip to celebrate
• Pay off your credit card, then get an Instant Pot because everyone is talking about them and you've wanted one for over a year
• Make an extra student loan payment, then buy tickets to an upcoming show or concert you want to attend

Whatever you decide, enjoy yourself. You should be able to get even more pleasure out of whatever you choose to spend your money on when you know you're also putting some of your refund toward a better financial future.

Buy something you need

Is there something you really need but have put off because it costs too much money? Consider how you could use your tax return to fulfill your actual needs, not wants. Think of items you use every day or would use every day to better your day-to-day circumstances.

Maybe your car could use a tune-up or it's time to upgrade your phone with the smashed screen so you don't miss any work calls. Maybe it's time to finally get that dental work done that you've been putting off due to budgeting concerns.

Even a new computer, while it might sound like a "want," can make a huge difference if you use it for work. A newer, faster computer can lead to more productivity, and if that's something that will help your situation, go for it.

Try something new

Your options for allocating your tax return are endless, so consider this: When's the last time you tried something new? Not "new" as in a new restaurant, but something more substantial. Like, perhaps, taking a cooking class or pottery class?

Or, something like spontaneously heading to the airport with a small carry-on and buying an airplane ticket? Maybe there's a charity you've always thought about donating to but haven't yet.

Research shows spending money on experiences, rather than tangible items, improves our happiness. So if you're able to put money toward new experiences, it's highly recommended. They say money can't buy happiness, but maybe it can (a little).

Bottom line on maximizing your tax refund

It's easy to see a tax refund as extra spending money, but this usually isn't the best way to use it. If you absolutely must spend some of your tax return on something that will send your dopamine and serotonin levels through the roof, consider allocating some of your refund toward something that will benefit the future you as well.

If you're due a tax refund, remember that it's actually money you overpaid throughout the year. So while it might feel like a big bonus check, it's money you could have otherwise held onto, stuck into a high-yield savings account, and earned interest on until taxes were due. Consider the benefits of how to manage your money to improve your financial situation before you turn around and spend it all.