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Six Smart Things to Do With Your Tax Money

A tax refund can be a much-needed gift. Even though it’s technically an overpayment, you might see it as free money. And as such, you can likely think of several ways to have fun with your windfall.


But freebies don’t come around that often. So before you book that winter trip, here’s a look at six smart things to do with a refund.


Knock out credit card debt


Credit card debt is interesting. It doesn’t take much effort to dig oneself into a hole, yet it takes a near miracle to dig oneself out (or at least it can feel that way).


This is one of the most expensive types of debt, especially if you’re paying a higher rate and carrying a balance from month-to-month. So while knocking out credit card debt might seem like the “least” fun way to spend a tax refund, your future self will thank you.


Paying it off reduces how much you owe in interest, increases your credit score, and most importantly, makes it easier to get a mortgage loan.


Stack your cash


Be honest: Can you realistically afford an emergency? What if you lost your job or couldn’t work? Do you have a 6 to 12-month emergency fund?


Tax money is bonus money, so maybe you prefer to have fun with it. But if you’re struggling to save an emergency fund, a refund might be the answer to your financial prayers. Especially since an emergency fund is one of the best weapons against credit card debt.


Give your retirement account a boost


Time can tick away quickly. One moment you’re 22, and in the blink of an eye you’re staring at retirement. So if you haven’t already, open a retirement account and use the cash to play catch-up.


Start a down payment fund


Buying a home is one of the most expensive purchases you’ll make. So not surprisingly, closing the deal can take a chunk of your hard-earned savings. Aside from the minimum 3.5% and 5% down, you’ll need roughly another 2% to 5% for closing.


But don’t let these numbers scare you. If you get an average tax refund of $3,000, after five years you’ll have $15,000 for a home purchase.


Make an extra mortgage payment


You already make 12 mortgage payments a year, so why in the world would you make another one?


Of course, you don’t have to do this. But if you’re looking to pay off the loan earlier, think of this 13th payment as the golden ticket.


Making an extra principal-only payment each year can reduce your mortgage term by several years—and it saves a ton in interest!


Refinance your mortgage loan


Mortgage rates are constantly on the move. And when rates drop, refinancing can lower your rate and monthly payment.


For just a moment, imagine what you could do with an extra $200 or $300 in your pocket every month. Fix up your home, pay off other debt, or have more experiences.


But refinancing isn’t all roses and sunshine. It involves paying closing costs again. But don’t worry. You can probably recoup these costs in about 2 to 3 years.




For some people a tax refund is code for new electronics, vacations, and shopping sprees. But while there’s nothing wrong with treating yourself to a little fun, tax refund season only comes once a year— so make good use of a refund.


Ready to put your refund to work? Contact the loan experts at Real Genius to explore your mortgage options, whether you’re refinancing or getting a new purchase loan.

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