5 minute read

25 Smart Ways to Spend your 2024 Tax Refund

Getting ready for your 2024 tax refund? Before you splurge on something, consider these 25 smart ways to invest in yourself to get the biggest bang for your buck.

Patrick Hicks

Patrick Hicks, @PatrickHicks

Head of Legal, Trust & Will

Tax season seems to earn itself a collective groan. Most Americans feel that they spend too much on their taxes, and expect too little in return. (Specifically, two-thirds of Americans, according to a recent poll.)

For some, however, filing taxes in due time can come with a "reward," depending on how you look at it: a tax refund!

With inflation at a seemingly all-time high, any type of tax refund will be welcomed. According to CBS, tax refunds will be larger on average compared to last year. Some stand to receive up to 10% more, according to IRS officials.

With that said, now is the perfect time to create a strategy of how you will spend your refund.

Without a strategy in place, it will be all-too-tempting to spend your refund on a whim purchase. Make this your year to spend (or invest) your refund in the smartest way possible, and you'll be thanking yourself years down the line.

In this fun guide, Trust & Will collected tips on how to best spend your 2024 tax refund from some of the top money experts across the internet.

Which ones will you choose?

How to Spend your Tax Refund: Money Expert's Top 25 Tips

We scoured the internet's top financial experts, from TurboTax to Rocket Money to Dave Ramsey, and many more. Here, we aggregated all of their top tips on the smartest ways to spend (or invest) your 2024 tax refund.

  • Create an Emergency Fund- Setting up an emergency fund with your tax refund is a smart way to start building a safety net for yourself. Think of it as a cushion for those unexpected moments - like when you suddenly have to pay for car repairs, medical bills, or if you lose your job. Instead of worrying about going into debt, you have this fund to fall back on. This means you won't have to sweat the small (or big) stuff as much, and your long-term financial plans can stay on track, no matter what life throws your way.

  • Pay off Credit Cards - Most financial advisors will recommend that you start tackling high-interest debt after setting up your emergency fund. Namely, credit cards with compounding interest rates are the key culprits that keep you from attaining financial freedom. By paying down debt, you're not only tackling the principal but also protecting it from increasing interest. Eliminating debt can also improve your credit score, making the cost of borrowing money for other purchases much lower.

  • Max out your Retirement Contribution - One of the smartest things you can do with your tax refund is pump it into your retirement savings. Not only does it set you up for a comfortable future, you also get some tax perks today. Putting money into accounts such as 401(k)s or traditional IRAs will help lower your taxable income. It may even bump you down to a lower tax bracket, which means you pay less tax this year. Thanks to the magic of compound interest, the earlier and more you contribute, the bigger your retirement fund grows.

  • Start an Investment Portfolio - Think about it this way - dropping your tax refund into an investment portfolio is kind of like planting a money tree in your backyard. Except instead of watering it, you leave it alone and watch it grow over the years. Investing your refund is a smart move because it’s not just sitting there; it’s working for you. Who doesn’t love the sound of earning money in their sleep?

  • Make Home Improvements - Using your tax refund to make home repairs and improvements serve multiple purposes. First, everyone in your household will have an improved quality of life when you finally fix that leaky faucet or give the window trimmings a fresh new look. Further, you're also investing in yourself by  increasing your home's market value.

  • Save up for a Down Payment - Using your tax refund as a down payment for a house can be a smart move. It's more than just buying a place; it's investing in your future. This money can get you a lower interest rate, lower your monthly payments, and possibly avoid private mortgage insurance. It's a way to benefit your future self. Plus, owning a home is exciting because it's yours to create memories in. Homes usually increase in value over time, so if you sell later, you might make some profit. It's like your tax refund is a seed that grows into a big tree in your financial future.

  • Pay off your Student Loans - Paying off your student loans with your tax refund might sound like the adult equivalent of eating your veggies before you can have dessert. It's not the most thrilling choice, but it's one of the smartest moves you can make. By tackling those student loans head-on, you're not just getting rid of a monthly payment; you’re freeing future you from the chains of debt. Further, paying off your student loans early can save you a lot of cash in interest down the line. The sooner you pay off those loans, the less you'll hand over in interest, meaning more money stays in your pocket.

  • Invest in Your Skills - What if you could turn your tax refund into your biggest career promotion to date? Investing in your own skills development could be just the edge you needed to get noticed by your superiors. Whether it's taking an online course, attending a workshop, or getting a certification, this investment will empower you to take advantage of the next big opportunity that comes your way.

  • Donate to a Cause you Care About - Donating your tax refund to a cause you care about is like voting for a better world. It means you’re helping shape a brighter future for everyone, including yourself. It shows you care and want to make a difference. Plus, it feels good and can even offer tax benefits. It's a smart way to show what you stand for and the positive change you want to see.

  • Splurge - Saving money and being responsible with finances is important, but so is treating yourself. Spending your tax refund on something you've wanted, like a gadget or a trip, isn't just for fun. It helps your mental health, shows that hard work pays off, and makes you happier and more productive. Sometimes, the smart way to manage money includes spending on things that make you happy.

  • Save up for your next Vacation - Using your tax refund for a vacation? It's a smart idea. Life is hectic, and that refund can be your ticket to a well-deserved break. A vacation is more than fun; it's good for your mental health, offering a chance to relax, explore new cultures, or just chill. It can make you happier just anticipating it and adds excitement to your daily routine. A vacation can recharge you, help you come back from burnout, and thus making you ready to face the world again.

  • Start or Add to an Education Fund - Starting or adding to an education fund for your children with your tax refund is a forward-thinking decision that underlines the importance of investing in the future. Education costs, especially college tuition, are on a steady rise, and setting up or boosting an education fund early can significantly ease the financial burden down the line. Not only does this act as a safety net, ensuring your children have the resources to pursue higher education without the daunting prospects of student loans and debt, but it also instills in them the value of education from a young age. Investing in your children's education is investing in their future success and well-being, making it one of the most impactful ways to use your tax refund.

  • Buy Life Insurance - Purchasing or upgrading your life insurance policy is one of the smartest ways to spend your tax refund because it provides financial security and protection for your loved ones in the event of your passing. Life insurance can help cover expenses such as funeral costs, remaining debts, and even future expenses like college tuition for your children. By using your tax refund towards a life insurance policy, you are not only ensuring your family's financial stability in the future but also alleviating any potential burden they may face.

  • Upgrade your Health Insurance - Upgrading your health insurance may not seem like the most exciting way to spend your tax refund, but it can have a huge impact on both your physical and financial well-being. With healthcare costs constantly on the rise, having better coverage can help you avoid unexpected medical expenses and save money in the long run. It can also give you access to better healthcare options such as specialist doctors or alternative treatments.

  • Invest in your Wellness - Investing in your wellness is a profoundly wise use of your tax refund, as it directly contributes to enhancing your quality of life and longevity. Whether it's through purchasing a gym membership, attending wellness retreats, or enrolling in stress-relief programs, holistic wellness can significantly improve your physical health, mental well-being, and overall happiness. It's an investment that not only benefits you today but also sets a foundation for a healthier future.

  • Add it to your Health Savings Account - Contributing to your Health Savings Account (HSA) with your tax refund is a savvy financial strategy because it offers a triple tax advantage: contributions are tax-deductible, the account's growth is tax-free, and withdrawals for qualified medical expenses are tax-exempt. This means you can use pre-tax dollars to cover future medical costs, effectively reducing your overall healthcare expenses and securing a financial safety net for health-related emergencies.

  • Start a Business - Starting a business with your tax refund, particularly one that generates passive income, is an astute financial move because it transforms a one-time financial boost into a potentially continuous stream of earnings. This approach to using your refund can not only foster personal financial growth and independence but also offer stability by diversifying your income sources. In essence, it's about letting your money work for you, turning a temporary gain into a lasting asset.

  • Pay down your Mortgage - Prepaying your mortgage with your tax refund can significantly reduce the amount of interest you pay over the life of the loan, leading to substantial long-term savings. It also accelerates your path to fully owning your home, providing financial security and peace of mind. This strategic use of your tax refund not only leverages a temporary financial gain for immediate benefit but also strengthens your financial foundation for the future.

  • Pay down your Auto Loan - Paying down your auto loan can significantly decrease the amount of interest you pay over time, making the overall cost of your vehicle less expensive. Reducing your loan balance can also lead to lower monthly payments, freeing up more of your income for other financial priorities or savings.

  • Pre-pay Bills for the Year - If you find yourself stressing about money from month-to-month, maybe one thing that can give you some peace of mind is to improve your cash flow. If there are certain bills for services that you know you'll need all year, consider paying them for the entire year up front. This will help knock out some recurring expenses and free up some cash for your longer-term goals.

  • Upgrade failing electronics - Does your laptop keep freezing or shutting off? Maybe it's time to use your tax refund for an upgrade. Especially if you work from home or are self-employed, upgrading electronics you use for business purposes can set you up for a tax write-off.

  • Put Money Away for Shorter-term Goals - Setting money aside for short-term goals with your tax refund is a strategic move, as it allows you to plan proactively for upcoming expenses without the need to dip into emergency savings or rely on high-interest credit. This not only ensures that you're prepared for the financial aspects of your immediate future, such as vacations, home repairs, or special purchases, but also promotes a stress-free financial environment that can significantly enhance your overall quality of life.

  • Invest in a Service that will Improve your Quality of Life - Investing your tax refund in a service that frees up your time can significantly enhance your quality of life by reducing daily stress and allowing you to focus on activities that bring you joy and fulfillment. Whether it's hiring a cleaning service, subscribing to a meal delivery plan, or even engaging a financial advisor, these investments not only save you precious time but also contribute to a healthier, more balanced lifestyle. The value of time cannot be understated, and any service that offers more of it can be considered a wise investment in your overall well-being.

  • Open a Credit Card with Benefits - If you've paid off all of your debt and feel confident that you can manage debt wisely, consider making your credit cards work harder for you. Many financial advisors will tell you that you should only be using credit cards if you can pay off the balances each and every month. That way, you will avoid losing money to interest. If you feel like you can do this, consider using your tax refund to open a credit card that comes with benefits. For example, some top-rated credit cards will require you to spend a certain amount within a set timeframe in order to receive a sign-up bonus in the form of points. Use your tax refund to pay off this initial balance in full so that you don't go into debt.

  • Purchase an Estate Plan - Last but not least, consider using some of your tax refund this year for one of the wisest moves of all– buying yourself a Will or a Trust. Having an estate plan in place can bring immense peace of mind for both you and your loved ones. Without one, the state will decide who gets what from your assets. However, with an estate plan in place, you have control over how your assets are distributed and who will make decisions.

Trust & Will is an online estate planning platform that makes it easy for you to set up your Will, Trust, and other estate planning documents you may need. Even better, we provide our plans at affordable rates, meaning more of your tax refund will stay in your pocket. Take our quiz to get matched with an estate plan today.

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