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4 Ways to Use Your Tax Refund Wisely

Mar 28, 2022

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Are you someone who is expecting a tax refund this year? If you are and you’re like most people, you probably already have ways you can put it to use in mind. However, before you put serious thought into your options, we want to suggest a few ideas about how to use that money wisely, which could really benefit you in the long run. After all, you’ve worked hard for this money and it should work just as hard for you in return. 

Setting Up Your Future Self for Success

Take a moment to think back on how you’ve spent your tax refund in the past. Some people put it in savings for a rainy day. Others see it as “found money” and spend it just as fast as they received it — with nothing to show for it in the end. Wherever you fall between these two extremes, this could be the year to think differently when it comes to your tax refund. Instead of spending it all at once, giving into instant gratification or using it toward something that you may regret later, consider creating a unique opportunity to set yourself up for a brighter financial future, starting this year. 

Here are four ways that will help you reap financial benefits far beyond the amount of your initial refund. 

1. Establish an Emergency Fund 

An emergency fund is one of the best things you can do to set yourself up for financial security. One of the main reasons people find themselves in a financial bind — like racking up an exorbitant amount of credit card debt — is because they haven’t intentionally set aside money for unexpected expenses (think car repairs, an accident or the loss of a job). 

This year, think of your tax refund as an opportunity to jump-start your emergency fund. That way, when you do need to pay for something big, you’ve got the money set aside. As a rule of thumb, experts encourage people to set aside roughly three to six months’ worth of living expenses — so spend some time making a list of how much you spend on bills, groceries and other needs on a monthly basis so you’ll know the exact amount you need to save.

We know this one doesn’t exactly count as “spending” your tax refund, but it is a great way to use those dollars to help your peace of mind. Knowing you have money in the bank in case an emergency arises or you cannot work for a period of time can really help ease anxiety as well as make you feel more prepared and in control.

2. Pay Off Credit Card Debt

If credit card debt is the opposite of financial freedom, then paying off credit card debt (even if only a little at a time) is a worthy way to allocate your tax refund this year. We get it, paying off credit card debt often feels like a never-ending road — plus it’s extraordinarily expensive, routinely costing between 20% and 25% in annual percentage rate fees.1 To make more headway, use your tax refund to pay more than just the minimum monthly payment. 

Keep in mind that getting things you want should never involve an ultimatum; you shouldn’t have to choose between getting it and going into debt, or not being able to get it at all. That’s why Acima offers lease-to-own solutions so consumers just like you can get what they need, when they need it, without using credit.* Our alternative to financing means you can make affordable lease renewal payments until you own the leased item, so you never have to worry about going into credit card debt or not getting approved for traditional financing.  You can also save by purchasing the item early.  Either way, it’s yours to keep.  The sooner you do so, the more you’ll save.  If you no longer want the leased item, you can return it in good condition at any time without penalty.

3. Put Your Refund into Savings or Retirement

If you are already debt-free and you have a solid emergency fund … first of all, we applaud you! Now here’s your nudge to put your tax refund toward another wise investment — your future. Move the money into a savings or retirement account to make sure you are covered financially in your later years.

Though it may seem hard to prioritize something that seems so far off, especially when there are things you’d like to have in the present moment, you won’t regret this decision when you see your investment growing over time. And you can’t put a price on the peace of mind you’ll have knowing you have a financial padding down the road of life. So if you think you’re too young or you can always catch up later, consider this: People always wish they started saving and investing in these types of accounts sooner. 

4. Spend it on Something Useful

Of course, there are times when it can indeed be wise (and when we would actually encourage you) to use your refund to pay for something you truly need so you can keep your normal family budget intact. And when you combine your tax refund with using Acima to get those things, then you actually can make your refund go further even when you’re spending it. 

Does your car have a flat tire that needs replacing? Shop new, name-brand tires with our auto retailers who offer lease-to-own* solutions with Acima. Feeling spread too thin and need a kitchen appliance like a dishwasher to help take some manual chores off of your plate? Invest in appliances like a dishwasher or a washer and dryer set that can do the job for you. Refrigerator acting up? Get it repaired, or better yet, replace it entirely with a newer model. Bottom line: Spending your refund is perfectly acceptable as long as it’s being put to good use. 

A Closing Thought

If you do end up receiving a tax refund this year, we encourage you to think about how you can save or spend that money in a positive, financially responsible way. That will look different for everyone, depending on priorities and responsibilities, but you’ll never regret using your tax refund in one of these four ways over something frivolous and fading.

Looking for more ideas to feel financially powered and in control? Check out this article with personal budgeting tips and practical ways you can both make and stick to a budget once and for all.