1. Build an Emergency Fund - One of the best ways to reduce stress in your life is to increase your margin. That includes giving you some cushion for the occurrence of "life events" like job loss, family health issues, etc. It's nice to have cash for these things when they come up rather than having to rely on credit cards or early withdrawal from retirement accounts!
2. Payoff Credit Card Debt - Credit card interest cripples your chances of financial success. Delay immediate gratification with your refund and apply it towards paying off credit card debt.
3. Payoff Consumer Debt - Once you have an emergency fund in place and have paid off credit card debt, fire away at those student loans & car loans! Imagine the feeling of not having a student loan payment or a car payment. What could you do with that money each month?
4. Save For a Major Purchase - Put the money toward a major purchase goal such as your next car, home upgrades, new appliances, or modern furniture. Set a goal for how much you'll need and save that amount so you can pay cash.
5. Save to Purchase a Home - Depending on the size of your refund, you may be able to make a dent in saving for your new home down payment. If done right, buying a home is one of the best ways to secure future retirement, and gain a tax deduction in the meantime. You can buy a home with as little as 3% down. Contact us if you have questions on this.
6. Contribute to Retirement Accounts - You can apply that money toward retirement accounts such as Traditional IRA's, Roth IRA's, 401k's, etc.
7. Give to Those Less Fortunate - Bless somebody else with your money. There are many ways you can be generous and change somebody else's life. Be creative! Here's a fun idea to use with Girl Scout cookies!
The key is to think about how you can best apply your refund according to your goals before you impulsively spend it aimlessly.