5 Smart Ways to Spend Your Tax Refund

5 Smart Ways To Spend Your Tax Refund

Congratulations! You completed your taxes, and a refund is heading your way. Now all you have to do is figure out what to do with that money. While there’s nothing wrong with treating yourself, here are a few smart ways to use your tax refund money.

1. Apply it toward debt.

   This year, make paying off debt a priority. Your credit report can help you identify your accounts, amount owed and interest rates. You can download one free copy of your credit report every 12 months from annualcreditreport.com or request one from any of the three credit reporting bureaus. From there, think about how your tax refund can help you manage or reduce your debt, then choose a budgeting style that will help you stay on track.

2. Bulk up your emergency fund.

   You don’t have to spend your refund right away; saving it is also an option. What would happen if you suddenly had a tire blowout or needed an emergency repair? Could you afford to fix it or be without that mode of transportation? Give yourself peace of mind and consider stashing some or all of your refund in a vehicle emergency fund. An emergency fund can help you manage sudden or unexpected expenses, like a flat tire, dead battery or fender bender without draining your savings or taking on debt.

3. Get ahead on payments.

   If your lender uses the simple interest method, that means interest on your account accrues on a daily basis and is based on the remaining unpaid principal on the contract. Check your contract to be sure. If you are a retail customer, each payment you make will first pay down any accrued interest, and the rest will apply to the principal or other applicable fees. See how an extra payment can help you get ahead.

4. Invest in car care.

   Maybe your tire tread is worn down, or perhaps there’s a weird rattle coming from somewhere under the hood. Now is a great time to do something about it. Your tax refund can help you pay for simple repairs or maintenance that may keep you safe, prevent severe issues down the road, increase fuel efficiency and extend the life of your vehicle.

   Research all of your options to help you make the best choice for your tax refund. If you’re ready to invest in your next ride, fill out an online prequalification application to help you save time at the dealership and get behind the wheel sooner.

5. Put it toward a vehicle down payment.

   If your finances are otherwise in order, you could consider putting the money toward a down payment on a new vehicle. While every situation is unique, using your tax refund as a down payment can help lower the overall cost you need to finance and lead to payments that better fit your budget. It can also help you avoid eventually owing more on your vehicle than it’s worth (also known as being “upside down” or “underwater” on your financing).

   When you visit the dealership, don’t be afraid to discuss combining your down payment with other offers or incentives with the salesperson. 

By Brooke Howell, GM Financial

Brooke Howell is a storyteller who loves digging up ways to improve money management and help others make smart financial decisions. She has three American Staffordshire terriers, one curmudgeonly Chihuahua and doesn’t do anything by halves (except marathons).