Tax season is slowly approaching and after the gifting holidays, you might be tempted to spend your entire refund on something you don’t really need like a new wardrobe, the wide-screen TV you’ve been wanting, golf clubs, or another non-necessity. It’s okay to spend a little for yourself, but being responsible about how you spend your refund now will be a huge help in the months to come. 

If you haven’t always spent your refund wisely in past years, here are some tips to get you thinking wisely about how to spend your refund: 

1. Use 30% of your refund to pay down debt. Using your refund to pay off high-interest debt, like credit cards, is a responsible way to utilize the extra money your refund check will bring. Paying off your debt could save you hundreds of dollars in interest that you would pay down the line. This is a great way to maximize your refund dollars.
2. Put 30% of your refund in an emergency savings account. From car maintenance and home improvements to medical emergencies, an inconvenient event is bound to come up in 2018, and you will want to be financially prepared. Most car repairs, home improvements, and medical procedures cost at least $250, even with insurance. Consider using part of your refund to open or add to your emergency savings account.
3. Be strategic. Create a monthly spending plan and write down how you will spend your tax refund throughout the year. If you divide the amount of money in your tax refund over 12 months, it won’t be as easy to splurge or spend your refund too quickly. Think of the new clothes you need for your growing toddler or teen, the braces your child may need, or paying for summer camp. Even if you allow yourself a spa massage every month, think of how much easier it would be to pay for it if you put money away for it now. Being strategic about how you will spend your money will make it easier to do it in the future.
4. Start a ‘special occasion’ or holiday fund. How many times has Valentine’s Day, your anniversary, or your parent or child’s birthday snuck up on you and you realize too late that you don’t have the finances you need to pay for gifts? Special occasions are meant to be celebratory, so avoid bringing stress to them by taking a chunk of your tax refund and setting it aside to fund future special events.
5. Consider giving back. When you are working to make ends meet, the thought of putting money toward anything other than your own bills or savings account might be difficult. But think of the lesson it will teach your kids, and the feeling it will give you to donate $5-10 a month to a local food pantry or shelter. Not only will you will be helping your community, you will give yourself a tax write-off for the next year. 

Making the wise decision to strategically plan how you will spend your tax refund now will save you from potential financial headaches that can come later. Taking steps now before the tax season arrives will set in motion smart financial practices that will not only help you at tax season, but throughout the year. Learn more about saving at tax time at americasaves.org.