Smart Ways to Use Your Tax Refund

It’s that annual time of year when many of you will be receiving a tax refund. So it is also that annual time of year when I encourage you not to blow it.

And by blow it, I mean having no plan for how you will use your refund to build financial security.

We’re typically talking about a big chunk of money; the average refund is around $3,000. But if you don’t make a plan for what you will do with that money, it will just land in your checking account, and you and I both know it might just get spent before you realize it’s been used up.

Not this year. Not you.

Right now, before you get your refund, put some thought into how to use that money.

I have suggestions on smart moves to make (more on them in a sec.), but I want to stress that you should choose the goal that will help you the most. And by help, I am referring to what will make you feel more confident, sleep better, and worry less. If there is a financial pressure point in your life, your tax refund (maybe two, if you have state income tax as well) is a great opportunity to reduce that pressure. That’s not just something you deserve right now, but I think you will find that making progress on reducing a particular stress can pay off by building your confidence and momentum to keep going on building financial security.

Here's how to do some pre-refund planning: I want you to literally ask yourself: What stresses me out the most? Maybe it’s two things…or more. There is no rule that all of your refund must go toward one goal. You can attack multiple goals.

I doubt you really need my advice, but here are a few ideas for ways to reduce likely pressure points:

Increase your emergency savings account. If you have yet to open an Ultimate Opportunity Savings Account at Alliant Credit Union, I sure hope you will give it a look. Follow a few simple rules and you will earn a $100 bonus.

Pay down credit card debt. Is paying down or paying off a credit card debt that can be charging 22% annual interest smart? Well, of course. But only if you don’t turn around and run up new charges that you can’t afford to pay off. Are you ready to lean in harder to the idea of only using your credit card for true needs and not charge a penny for wants?

Contribute to a Roth IRA. Even if you are saving for retirement through work, you may be eligible to also save in a Roth IRA. If you are single with a modified adjusted gross income below $150,000 in 2025 (or below $236,000 if you are married and file a joint tax return), you can contribute $7,000 to a Roth IRA. If you are at least 50 years old, the limit is $8,000.

Take classes to learn new skills. Maybe it’s something you are interested in as a new career or hobby. Or maybe you want to build your skills for work (first, ask your employer if they might cover some or all of the cost). Investing in you is always smart.