Is it just me, or do you think “money” when April comes around? Many people receive their tax refund this time of year, and that can put money on your mind. Your first thought might be to go on a shopping spree, but if you take some time to think about it, there may be some smarter ways to use your refund.
Emergency fund – An emergency or “rainy day” fund is an account with money set aside, usually an amount that covers three to six months of expenses, for an unforeseen event such as a job loss or serious illness. An emergency fund also serves as a safety net for any surprise expenses. This fund should be easily accessible and kept in a checking, savings, or money market account. Having an emergency fund also helps by luring you away from credit card debt. In case of an unexpected event, you’ll have the money available to pay for the expense without having to charge it on your credit card. As a student, having an emergency fund allows you to be financially resilient. This means that you will be prepared for and able to recover from unexpected financial situations that could otherwise cause you to drop out of school.
Pay down some debt – Maybe you are trying to pay down some credit card debt, but you cannot catch a break from that high-interest accrual on top of your balance every month. Using your tax refund to pay all or some of your balance can help. The order in which you pay them is up to you. Consider the amount owed and interest and/or fees associated with the debt to see what makes more sense for your situation. You may have other debts you want to pay off too, such as past due utilities, insurance, or car payments. Keep in mind your tax return can help you get caught up on amounts you owe and save you money on interest and fees for past due bills.
Save it – You may have little to no debt and an adequate amount in an emergency fund. If this is your situation, saving at least part of your refund, instead of spending it, is the smarter choice. There are plenty of reasons why you may want to save your refund, for example, an upcoming school payment or a major purchase. Saving your tax refund will give you more financial wiggle room in the future.
Treat yourself – We have covered some smart uses for your refund. Did I forget to mention that treating yourself is not a bad idea either? If school is stressing you out, and you’ve been wishing you could get a massage to help you relax, go for it! Treating yourself does not mean you are irresponsible with your money. You deserve it!
Putting a little thought into how you use your refund can help you make smart choices that will benefit you in the long run.
I am a bilingual (Spanish/English) coach with an educational background in personal finance. I recently obtained my Master’s in financial planning from Texas Tech University, where I also gained practical experience in coaching students. While at Texas Tech, I coached my peers about their educational and financial concerns through individual coaching sessions and presentations. As a first-generation and minority graduate, I understand that succeeding through college can be difficult at times. I believe I can relate to what you are going through emotionally, mentally, and academically. Having recently graduated myself, I hope that with my education, experience, and empathy, I can provide you with the right tools to help you achieve your educational and financial goals.
This service is not intended to constitute any tax, investment or legal advice. If you need investment, legal, tax advice, and/or credit counseling, please consult with a professional within those areas.
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