Credible
Get Rates
  • Refinance Student Loans
    • Compare Options
      • Best Refinancing Companies
      • Lender Reviews
      • Refinance Student Loans
      • Student Loan Consolidation
    • Learn the Basics
      • Fixed vs. Variable Rates
      • Forgiveness Programs
      • Consolidation vs Refinancing
      • Repayment Plans
      • More on Student Refi
    • How to
      • Consolidate Your Student Loans
      • Pay Off Your Student Loans
      • Lower Your Interest Rate
    • Tools
      • Current Student Loan Refi Rates
      • Refinancing Calculator
      • Repayment Calculator
      • Student Loan Score Calculator
  • Student Loans
    • Compare Options
      • Private Student Loans
      • Parent Student Loans
      • Law School Loans
      • Medical School Loans
      • Graduate Student Loans
    • Learn the Basics
      • Student Loan Limits
      • Living Expenses
      • Applying for FAFSA
      • Federal Student Loans
      • Student Loan Interest Rates
      • More on Student Loans
    • How To
      • Pay for College
      • Take Out Student Loans
      • Apply Without Cosigner
      • Apply for Student Loans
      • Pay for Grad School
    • Tools
      • Best Private Student Loans
      • Current Student Loan Rates
      • Student Loan Interest Calculator: Estimate Payments
      • Lender Reviews
  • Personal Loans
    • Compare Options
      • Best Personal Loan Lenders
      • Lender Reviews
      • Get Personal Loan Rates
    • Learn the Basics
      • How to Qualify
      • How to Get a Loan
      • Where to Get a Loan
      • Personal Loans with Cosigner
      • Pay Off Credit Card Debt
      • More on Personal Loans
    • Best for
      • Credit Card Consolidation
      • Debt Consolidation Loans
      • Home Improvement Loans
      • Good Credit
      • Fair Credit
      • Bad Credit
    • Tools
      • Current Personal Loan Rates
      • Personal Loan Calculator
  • Mortgages
    • Compare Options
      • Mortgage Refinance
      • Home Loan
      • Best Mortgage Refinance Companies
      • Best Mortgage Lenders
      • Mortgage Preapproval
      • Mortgage Payment Calculator
    • Compare Rates
      • Mortgage Refinance Rates
      • 30-Year Fixed Refinance Rates
      • 15-Year Fixed Refinance Rates
      • Home Loan Rates
      • 15-Year Fixed Mortgage Rates
      • 30-Year Fixed Mortgage Rates
    • Learn the Basics
      • How to Buy a House
      • How to Refinance Your Mortgage
      • How to Get the Best Rate
      • Cash-Out Refinancing
      • More on Home Loans and Refi
    • Pay Off Mortgage
      • Home Equity to Pay Off Debt
      • Paying Off Mortgage Early
      • Mortgage Refinance Cost
  • Insurance
    • Insurance Products
      • Insurance Products
      • Learn more about home insurance
    • Compare Options
      • Compare Insurance Quotes
      • Home Insurance Guide
    • Learn the Basics
      • What Home Insurance Covers
      • How Much Home Insurance You Need
      • Estimate Your Home Replacement Cost
      • How to Change Home Insurance
  • Company
    • About
    • Reviews
    • Blog
    • Lenders
    • Editorial Guidelines
    • FAQs
    • Press
  • Find My Rate
Advertiser Disclosure

8 ways to make your tax refund go further

Credible Staff Credible Staff Updated May 4, 2021

Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. Credible Operations, Inc. NMLS # 1681276, is referred to here as "Credible."

Every year, the IRS issues over $300 billion in tax refunds to more than 100 million Americans — close to $3,000 per taxpayer, on average.

While it would be tempting to blow at least some of this windfall on indulgences like a vacation, spending your tax return wisely can maximize its value.

Richard Cordray, director of the Consumer Financial Protection Bureau, recently noted that more than 70 million Americans have no emergency savings, and many others are paying down high-interest debt.

“As we approach the upcoming tax season, we know that a tax refund may be the single biggest check some consumers will receive all year,” Cordray said. “The refund is a good opportunity for individuals to pay down high-cost debt or set aside even a small amount of savings to help reach their financial goals.”

Here are eight smart things to do with your tax refund that can have long lasting financial benefits.

Pay off high-cost debt

If you have credit card debt that you’re paying 15, 20, or 25 percent interest on, using your tax refund to pay it off is like investing your money and getting an unusually high rate of return.

If you’re paying down a $3,000 credit card balance at 20 percent interest by making minimum payments of $120 a month, it will take you 10 years to retire that debt. You’ll pay more than $1,900 in interest, or nearly $5,000 in total. Zap that debt with your $3,000 tax refund now, and that $1,900 stays in your pocket.

In general, personal finance experts advise that you pay down debts with higher interest rates first. If you have student loans that carry lower interest rates — particularly subsidized government loans — you don’t necessarily need to sweat those if the monthly payments are manageable.

Refinance your student loans! Compare offers from multiple, vetted lenders on Credible.
Find my rate

But if you’ve got older student loans that carry higher interest rates — particularly graduate school debt — those may rank higher on your list of priorities. If you can’t pay off your high-interest student loans outright, consider refinancing them at a lower rate.

Establish a rainy day fund

If you don’t have a reserve fund with enough money set aside to cover three to six months of expenses, you could be asking for trouble. An unexpected medical emergency or job loss might leave you with little choice but to borrow money at high interest rates in order to take care of basic living expenses.

The money you set aside for your rainy day fund should be accessible at the drop of a hat, so think twice about investing it in stocks, bonds, or certificates of deposit. A money-market or savings account will allow you to earn a little interest on your rainy day fund, but using your checking account may help you maintain a minimum balance needed to avoid fees.

Invest for the long run

If you’ve already got enough savings to cover three to six months of expenses, consider long-term investment opportunities. If your employer offers a 401(k) or other retirement plan, many financial advisors recommend taking full advantage of employer matching dollars. Remember that money that you contribute to a 401(k) is pre-tax income, meaning you get more bang for the buck.

Invest in yourself

Going back to school to earn a higher degree or learn new skills can pay off by making you more employable and increase your earning power. Even a small tax refund can pay for many continuing education courses, and a larger one can get you started on the path to completing a certificate or degree program.

Invest in your children

A 529 plan lets helps you grow savings that you set aside for college and other post-secondary training for any designated beneficiary — a child, grandchild, relative, or friend — even yourself. While the contributions you make to 529 plans are not tax deductible, gains you make on investments (the plan’s earnings) are exempt from federal taxes — and generally not subject to state taxes, either– when used for qualified educational expenses. Qualified expenses include tuition, fees, books, room and board — even computer technology and equipment now qualifies.

You can sock away up to $14,000 a year in each 529 plan you create without tax consequences. Considering how fast tuition and other college expenses are growing these days, a 529 plan could help a loved one graduate with as little student loan debt as possible.

Invest in your home

Many home improvements — particularly those that result in energy savings — can save you money in the long run. Energy efficiency projects that deliver the biggest bang for the buck include insulation and weatherization, and installing a programmable thermostat. According to the U.S. Department of Energy, the typical U.S. family spends at least $2,200 a year on home utility bills, and could trim up to 25 percent of that cost by employing tips in its Energy Saver Guide (many of the tips in the guide can be employed by renters, too). Many states offer weatherization assistance programs.

Save for a big purchase

If you’re yearning for a vacation or know that you’ll soon be facing a big expense like a new roof for you house, you can save a lot by planning ahead and paying cash instead of borrowing money to pay for it.

Protect your assets

If you have only the minimum required personal liability coverage for your auto and homeowners insurance policies, your assets could be vulnerable if you’re hit with a legal judgment on behalf of someone who’s injured in an accident. California, for example, requires only that drivers carry bodily injury liability insurance of $15,000 per person, with a total of $30,000 in coverage per accident for injuries sustained by others, and $5,000 in property damage liability insurance. A few hundred dollars in extra insurance premiums can provide up to $1 million in additional coverage.

One last thought. If you find yourself cashing a big tax refund check every year, you might want to think twice about whether that’s a good thing. Getting a tax refund means that you let Uncle Sam withhold too much from your paycheck. While you’ll eventually get that money back, you’re essentially giving the government an interest-free loan while it holds on to it.

One way to adjust your witholdings is to increase the number of exemptions you enter on the W-4 on file with your employer. You can use the IRS withholding calculator to make sure you’re claiming enough exemptions.

Check out: Everything You Should Know Before Taking Out a Tax Refund Advance

About the author
Credible Staff
Credible Staff

The goal of the Credible editorial writers and staff is to help our readers get up to speed on issues surrounding student loans, mortgage, and personal finance, so you can make informed decisions. We’re here to help you stay on top of the latest news, trends, concepts, and changes in policy and regulations.

Read More

Home » All » Personal Finance » 8 ways to make your tax refund go further

Personal Loan Basics


  • Personal Loan Interest Rates
  • How to Get a Personal Loan
  • Qualify for a Personal Loan
  • Where to Get a Personal Loan
  • Time to Fund a Personal Loan
  • How to Get Out of Credit Card Debt

Personal Loan Amounts

  • Get a $5,000 Loan
  • Get a $10,000 Loan
  • Get a $20,000 Loan
  • Get a $50,000 Loan
  • Get a $100,000 Loan

Tools and Resources

  • Good Credit Loans
  • Fair Credit Loans
  • Bad Credit Loans
  • Get Personal Loan Rates
  • Current Personal Loan Rates
  • Best Personal Loan Lenders
  • Best Debt Consolidation Loans
  • Personal Loan Calculator
  • Lender Reviews

  • Click to share on Facebook (Opens in new window)
  • Click to share on LinkedIn (Opens in new window)
  • Click to share on Twitter (Opens in new window)
  • Click to email a link to a friend (Opens in new window)

Related Articles

Student Loans

What’s a Student Loan Refund and How Can I Request One?

Student Loan Refinancing

How to Stop Student Loan Tax Garnishment

Personal Loans

Everything You Should Know Before Taking Out a Tax Refund Advance

  • Read More
    • Refi Student Loans
    • In School Loans
    • Personal Loans
    • Mortgages
    • Insurance
  • Resources
    • Lender Reviews
    • Loan Calculators
    • Student Loan Score Calculator
    • Data Insights
    • Debt Statistics
    • Sitemap
  • Compare
    • Student Loan Refinance
      • Current Student Loan Refi Rates
    • Student Loan Consolidation
    • Private Student Loans
      • Current Student Loan Rates
    • Personal Loans
      • Current Personal Loan Rates
    • Refinance Mortgage
      • Mortgage Refinance Rates
        • 15-Year Fixed Refinance Rates
        • 30-Year Fixed Refinance Rates
    • Home Loans
      • Home Loan Rates
        • 15-Year Fixed Mortgage Rates
        • 30-Year Fixed Mortgage Rates
    • Insurance
  • Top Lenders
    • Best Student Loan Refi Companies
    • Best Private Student Loans
    • Best Personal Loans
    • Best Mortgage Lenders
    • Best Mortgage Refinance Companies
  • Company
    • About
    • Reviews
    • Blog
    • Editorial Staff
    • Editorial Guidelines
    • News
    • Press
  • Legal
    • Terms of Use
    • Privacy Policy

© 2023 Credible


Credible Operations, Inc. NMLS ID# 1681276 | NMLS Consumer Access | Licenses and Disclosures
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.