person filing taxes

How to stretch your tax refund

That satisfying feeling of seeing your tax refund hit your bank account can be exhilarating. If you’re one of the nearly 55 million people that have already gotten a refund, congrats! It's easy to treat a tax refund as "found money" rather than part of your earned income. 

However, before it disappears on impulse buys, let's talk about maximizing your refund to make it work harder for you. By viewing your refund as an opportunity for financial advancement, you set yourself up for a brighter future.

Plan to spend your refund carefully

It's tempting to treat yourself to some well-deserved goodies. While a little celebration is fine, it's easy to go overboard and regret it later. Instead, resist the urge to impulse buy. 

  • Set a budget: Before spending a dime, decide how much to allocate for each category (debt, savings, investment, shopping, etc.)

  • Shop around: Compare prices, even when making necessary purchases. Don't assume the first option is the best deal.

  • Use Ibotta: No matter what you decide to buy, be sure to check the Ibotta app for the best ways to earn cash back at your favorite online stores. 

Choose purchases with long-term impact

Alright, now that you’ve decided how much you can use to buy something for yourself, what should you spend your money on? Instead of splurging on fleeting pleasures, consider upgrades that will improve your quality of life and save you money in the long run. 

  • Travel: Spend that money on experiences instead of stuff by taking a trip. Be sure to save on travel, but don’t be afraid to splurge on things that will make it the trip of a lifetime. 

  • Invest in yourself: Use your refund to invest in courses, certifications, or tools that increase your earning potential.

  • Home repairs: Lower your monthly utility bills with energy-efficient appliances. Fix leaky faucets, drafty windows, etc., preventing future costs.

  • Reliable transportation: If car trouble is a recurring expense, use some of your refund to address it.

Pay down high-interest debt

The most financially responsible option might not be the most glamorous. If you have high-interest debt, like credit cards or loans, your refund presents an opportunity to pay them down significantly. Take a look at your accounts and decide which debt to pay off first. Reducing debt interest frees up money in the long run and improves your overall financial health.

Build your savings

Life is full of unexpected expenses. Having three to six months' worth of living expenses in a savings account provides peace of mind. If your emergency fund is lacking, your refund is a perfect way to boost it. And make sure your savings fund is in a high-yield savings account, or HYSA. These accounts can earn you up to 5% interest, compared to 0.5% interest at big name banks. And even though these banks are usually online-only, they’re still insured by the FDIC and totally safe. 

You can also consider putting your refund toward your retirement. Contributions to a Roth IRA or traditional IRA can grow significantly over time, and will make sure your golden years are comfortable. 

Give back

If you're fortunate enough to be comfortable financially, consider donating a portion of your refund to a cause you care about. You'll not only make a difference but could also benefit from potential tax deductions next year.

The bottom line

Your tax refund is a powerful tool depending on how you utilize it. A deliberate and strategic approach will make your hard-earned money do much more than a simple spending spree. Remember, small choices today will have a big impact down the line on your financial health and stability. So, choose wisely and make your tax refund work for you! And download the Ibotta app to save on whatever you choose to spend your refund on. 

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