5 ways your tax refund can make you richer and give you peace of mind

It's tax time!  Despite the hassle of filing your taxes, tax season is still a great time for lots of people. Why? Because of the refund!

The IRS reports more than 80% of tax filers get a refund and the average tax refund is more than $3,000. Although this is technically money you paid the IRS during the course of the year, it can still feel like a financial windfall.

Here are five smart ways to deploy — and grow — that bonus cash, to make yourself more financially secure in 2017.

1. Pay down debt 

The smartest way to use your tax refund is to pay down debt, especially if you owe high-interest credit card debt. As Investopedia explains, "putting your tax refund check towards paying it off will likely give you greater returns than any other option."

Not only will you be paying down your current balance, but you will also be saving the extra expense of additional interest charges on any unpaid balance. Use this calculator to see how much interest you'll pay on different credit card balances with different repayment schedules. 

2. Start your emergency fund 

You should have an emergency fund with three to six months of living expenses in it. If you are like many millennials, you probably don't yet. 

But you can. Just by putting your tax refund into an interest-earning savings account, you can easily start (or top off) your emergency fund. 

"An emergency fund will provide a solid financial cushion should anything surprise you, such as an emergency room visit," Robert Semrad, a senior partner at DebtStoppers, told Bankrate. That means you won't have to throw money away on credit cards if a bone breaks or you lose your job. 

3. Invest in a retirement account

According to a NerdWallet analysis, millennials may need to save 22% of their income for retirement — much more than the standard 10% to 15% that many experts recommend. That's because slower economic growth post-recession means that investments could produce lower returns than in the past.

The Individual Retirement Account is one of the most beneficial savings tools around, but IRAs are underutilized by millennials, in part because young people don't understand them, according to the Washington Post. There's also another problem though: Even if you know what these savings vehicles are, you might not be able to afford to set aside extra cash each month.

The good news is that a $3,000 tax return is a lot of cash — all of which could be invested in an IRA. Depending on your income and whether you or your spouse has a retirement plan at work, you can contribute up to $5,500 annually to a traditional IRA.  

Plus, you'll already be saving on taxes for next year's return. When you deduct the money you invest in your IRA, you reduce taxable income for next year. That's more money kept in your hands.

4. Use the cash for home improvement or home maintenance 

If you're itching to spend the cash from your refund, consider spending it on something that you'll enjoy for a long time.

U.S. News and World Report recommends you "consider applying your tax refund toward home improvements. It will improve the enjoyment of your home and can significantly increase your home’s value." 

Getting your gutters cleaned or revarnishing the deck may sound pretty boring compared, say, to a Hawaiian vacation, but it's a smart investment. Deferred maintenance can wind up costing you big time down the line.

Alternately, use the funds for a mini-remodel. A smart upgrade, like simply painting your front door, can pay off big.

5. Pay for career training or a course that can improve your skills 

Lastly, consider investing the money in yourself by using it to learn a new skill, foreign language, or other useful activity that might lead to more income down the line. 

The New York Department of Revenue advises taxpayers: "To earn that promotion or switch career paths, you often need additional training and education. You can put your tax refund toward college courses to help you in your career."

There are lots of classes that could help your career, from public speaking to industry-specific training programs. 

No matter how tempting it may be to blow your refund on a vacation, jewelry or tickets to a Broadway show, remember the best gift you can give yourself is peace of mind. And using your refund wisely will help you achieve it.

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