Saving Money Blog

Finance Blogs » Saving Money Blog » Smart ways to use your tax refund

Smart ways to use your tax refund

By Jeff Fruhwirth ·
Wednesday, April 17, 2013
Posted: 5 pm ET

If you are getting money back this tax season, don't simply blow it. Here are five smart ways to put your tax refund to work.

Pay off credit card debt

If you are getting some cash back, applying it to high-interest debt is a great move. Credit card interest rates are about 15 percent on the low end, and you can't get that type of return on any savings account.

Create an emergency fund, or start investing

Emergency funds are great because they provide cash for unexpected disasters. Having a fund like this can keep you from falling into credit card debt if a sudden expense arises. If you already have this type of cash set aside, use your tax refund to contribute to a Roth individual retirement account or traditional IRA.

Pay down other debts

Maybe you've got a car loan or some other type of debt. I used my tax refund to pay down some of my car loan, and now my truck is about two months away from being paid off. Without the tax refund money, I'd still be making payments into October.

Replace an old, inefficient appliance

Just about everyone has an old, inefficient appliance that costs a lot of money to operate and is expensive to replace. Earmark your tax refund for some or all of the replacement cost, and enjoy the benefits of lower bills for the life of the item.

Treat yourself

Use your tax refund to do something you've always wanted to do, like learn a new skill or take a class. If you always have been interested in food, sign up for a few culinary classes. If you want to get in better shape in 2013, purchase a gym membership and hire a personal trainer.

What are you planning to do with your refund?

Follow Jeff Fruhwirth on Twitter.

Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.