Doing your taxes might stress you out, but receiving a refund can put a big smile on your face. If you typically treat your income tax refund like prize money, you’re not alone — SoFi Associate Financial Planner Lauren Anastasio says that many people do, despite the fact that your refund is actually money you’ve already earned throughout the year. “I encourage people to think of their refund just like any other paycheck and use it for similar purposes,” she says. “So if you have debts or bills to pay, then your refund should be used to address those the same way you would with your regular income.”

Still itching to treat yourself or rarely have the extra funds to splurge? Anastasio cautions against mentally spending your refund before you have the money. “There’s nothing wrong with wanting to enjoy ‘found money,’ but by using your tax refund to improve your financial circumstances you may find that as time goes on your overall financial picture will start to improve. Then, you won’t have to wait until each spring to be able to afford something for yourself.” Read on for seven smart things you can do with your tax refund this year.

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1. Plan for the unexpected. “Receiving a tax refund only happens once a year, if not less often, and it can be an opportunity for you to build a solid foundation for your financial well-being,” Anastasio explains. “If you don’t have an emergency fund, starting a cash savings account tucked aside for a rainy day (ideally three to six months of your monthly expenses) is important for your future financial success.” Even more, Anastasio says that you shouldn’t get into the habit of expecting a refund every spring. “Tax reform passed in The Tax Cuts and Jobs Act of 2017, which had sweeping changes to the tax code that went into effect in 2018,” she notes. “This tax season, taxpayers across the country are learning how the new code impacts them and many might be blindsided to find they actually owe money this year. Tax laws change often, and you’re not guaranteed to receive a refund every year; becoming reliant on it could mean trouble for you in future years.”

2. Pay for what you bought already. Did you use your credit card to get enthusiastic about holiday shopping or recently splurge on a well-deserved dream purchase? One of the best things you can do with your tax refund is to pay for the shopping you already did. “If you have high-interest rate debt, you should pay it down as much as possible,” Anastasio instructs. “Whether you acquired debt through a large-unexpected expense or gradually over time, carrying a balance can be burdensome and expensive. Make a large lump sum payment with your refund and nip your interest expenses in the bud!” You’ll likely see a boost on your credit score by improving the debt utilization ratio, and the money you’ll save on interest will mean more funds for future purchases.

3. Learn new career skills. Investing in yourself can forging your financial future by easing a career transition, helping you earn a promotion, or even making it possible to start your dream side hustle or small business. “There are a variety of ways you can invest in yourself, but few more exciting than opportunities that can accelerate your career,” Anastasio agrees. “If you’ve been putting off starting your own business or rounding out your resume with a digital marketing class because of the cost involved, let your refund pay your way to boost your skills.”

A woman uses her smartphone to deposit a check

4. Add to your retirement fund. “It might not feel glamorous, but one day you will thank yourself for thinking about the long-term,” Anastasio promises. “If the idea of maxing out your retirement account seems unattainable because of your budget for the rest of the year, consider using this cash infusion to pad your savings for the future.” While the time when you can cash in may seem a long way off, the longer before retirement you invest, the more time that money has to grow, so even small contributions earlier in life can grow significantly by the time you’re ready to leave the workforce.

5. Protect your loved ones. “Some people think that life insurance is something you only need when you’re older, but waiting puts your loved ones at risk — and it could cost you significantly more money in the long run,” cautions Anastasio. “If you have any debt, like a mortgage or student loans, or are married with a family, life insurance is absolutely necessary regardless of how young you may feel.” Use your refund wisely by buying a term policy that offers solid protection; Anastasio tells us that most are very affordable and can give you peace of mind if something unexpected were to happen to you.

6. Invest for fun. Want to stash money away but feel good about the state of your retirement account? Anastasio says you can use your refund to figure out if you’re a “bull or a bear” by trying your hand at investing in the stock market. “Try something like SoFi Active Investing, which is a no-fee way to easily buy and trade individual stocks,” she suggests. Robinhood, a free app without trading fees, is another easy-to-use option.

7. Treat yourself! According to Anastasio, you can have your cake and eat it too. “It’s possible to be responsible with your tax refund and also treat yourself,” she encourages. “Take a small percentage of your check to put the fun back in refund! Instead of treating yourself with the full refund, responsibly set aside 10 to 20 percent for something for yourself.” Whether you’ve been wanting a cool new pair of kicks, a spa day, or something else, there’s no time like the present to enjoy it.

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