Tax season can be stressful. So, once filing your taxes is behind you, it’s natural to feel a huge wave of relief. If you’re expecting a tax refund, that relief often comes with excitement. Maybe you’re already picturing how you’ll treat yourself – a nice dinner, a mini vacation, or something you put off earlier in the year. Enjoying part of your refund is absolutely something to look forward to.
However, a tax refund carries more potential than just a moment of fun. While you’re already in a financial mindset, take time to plan how that money can build momentum in your life. A few wise choices today can reduce the stress of high-interest debt, jumpstart your child’s college fund, or put you closer to long-term goals.
Tip #1: Make a Clear Plan for Your Refund
Tax refunds feel like bonus money, and because of that, they can disappear faster than expected. Giving your refund a purpose before it arrives helps you enjoy it in a balanced manner while still making progress on important goals.
Think of your refund as an opportunity to move the needle in areas that might otherwise take months to build. For example, you might use your refund to:
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Add to your emergency fund to prevent relying on high-interest credit cards or payday loans when unexpected expenses pop up in the future.
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Move closer toward a major goal, such as a down payment for a new home, capital to start a small business, or funds for a dream vacation.
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Boost your savings for upcoming anticipated expenses, such as winter holiday shopping and travel.
SAVING HINTS:
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Many members find it helpful to divide their tax refunds into categories. For example, putting 70% toward financial goals and spending 30% on fun activities with their families. This tactic allows you to splurge a little and have fun while still strengthening your finances.
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If saving for a specific goal that is 6+ months away, such as holiday shopping or buying a home, consider putting the savings portion of your refund into a Share Certificate Account at the credit union (commonly called a Certificate of Deposit). These accounts allow you to earn higher dividends and prevent you from spending the money frivolously as you save.
Tip #2: Check & Adjust Your Tax Withholdings
Now that you’ve completed your tax return, you have a clear snapshot of how well your current withholdings are aligned with your actual tax liability. That makes now the perfect time to evaluate whether your W-4 selections still fit your financial situation. Even small adjustments today can prevent surprises during the next tax season.
Consider reviewing your tax withholdings if:
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You owed more this year than expected.
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Your tax refund was unusually large.
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You recently changed jobs or received a pay raise at work.
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A life change, such as a new baby, shifted your household structure.
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You want to smooth out cash flow during the year instead of receiving a larger year-end tax refund.
Updating your tax withholdings typically only takes a few minutes. Submitting a new W-4 to your employer can help ensure next year’s filing feels predictable and less stressful. Many members find that even a small adjustment improves their monthly budget and eliminates the worry of an unexpected tax bill in April.
Tip #3: Review Your Retirement Contributions
Tax season tends to spark bigger-picture thinking, which makes this the perfect moment to revisit your retirement savings. Even if retirement feels far away, the steps you take today can dramatically shape your financial freedom down the road.
A brief check-in ensures your contributions are still supporting your goals and current budget. When reviewing your contribution levels, ask yourself the following questions:
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Are you contributing enough to get your full employer match?
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Could you increase your contributions by 2% without straining your finances?
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Have your priorities shifted since the last time you checked your plan?
If your employer doesn’t offer a 401(k) plan, consider opening a traditional or Roth IRA with the credit union. These tax-advantaged accounts provide flexible ways to plan for your long-term future.
The sooner you begin building retirement habits, the more time your contributions have to grow – which can translate into real financial security later in life.
Tip #4: Put Extra Funds Toward High-Interest Debt
For many people, high-interest debt is one of the biggest barriers to financial progress. If part of your refund can be used to reduce credit card balances, the financial payoff is immediate. Lower balances mean fewer interest charges going forward, and that frees up more room in your budget for other goals.
Prioritize debt repayments toward:
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Credit cards with the highest APRs.
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Store-sponsored credit cards with promotional periods ending soon.
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Small lingering debts that never seem to go away.
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Multiple debts, like BNPL balances, that feel scattered or overwhelming.
DEBT HINT:
If you’re struggling to manage multiple credit cards, one of the easiest ways to save money is by consolidating the balances into a lower-rate loan. You will immediately save money and feel a sigh of relief with a single monthly payment.
Two ways to do this are:
Tip #5: Review Your Beneficiaries
Beneficiary designations tell the credit union and other financial institutions exactly where your funds should go if something happens to you. Ensuring those choices are up to date protects your loved ones from confusion and delays.
Updating your beneficiaries during tax season is ideal because you’re likely already making changes on your taxes due to significant life events, such as marriage, divorce, or welcoming a new child to the family.
Take time to review your beneficiaries on all financial accounts, including:
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Checking Accounts
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Savings, Money Market, Certificate Accounts
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Retirement & Trust Accounts
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Life Insurance Policies
Tip #6: Begin Preparing for Next Year Now
Preparing for next year’s taxes might feel premature, but small steps taken now can make next year’s filing significantly easier. When you set up a simple system ahead of time, you save yourself hours later – and you reduce the stress that tends to build as April approaches.
Here are a few easy habits to adopt throughout the year:
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Keep a digital folder for tax-related documents and receipts.
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Store physical forms in one place rather than letting them pile up.
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Track deductible items as they happen, such as charity donations, environmentally friendly home upgrades, or retirement contributions.
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Open a separate savings account where you can put a portion of earnings from side hustles and freelance work to cover future owed taxes.
Implementing these small habits now will have you going into next tax season with more confidence, knowing that everything is organized – allowing you to file your return sooner and easier.
We’re Here to Help!
Staying in “money mode” for just a little longer after filing your taxes can help you use your refund wisely and confidently. Whether your goal is to build savings, reduce debt, or simply become more financially organized, taking time to plan before you start spending your tax refund is critical.
If you want to learn more about consolidating high-interest debt or if you’re interested in our various savings accounts, we’re ready to help. Please stop by the Credit Union or call 410-687-5240 to speak with a team member today.