6 Smart Things You Can Do With Your Tax Refund

The ways a taxpayer can choose to spend his or her tax-refund dollars are virtually limitless. But it goes without saying that not all of them are especially wise and responsible options. (And many of the most tempting ways to spend the funds fall squarely outside the forward-thinking category.)

Sure, anytime a monetary windfall like a tax refund lands, a splurge or two may well be in order. But for those looking to put the bulk of their funds toward an improved financial future, spending lavishly on things like shopping sprees, lottery tickets, extended vacations and the like are typically not the best investments.

So, what are some of the best ways you can invest your tax refund to put yourself in a better financial position down the road? Consider these six wise ways to invest (at least the majority of) your tax refund:

  1. Pay down your debt — Perhaps the smartest move for anyone carrying high-interest debt — including credit card debt, which in the U.S. carries an average APR of over 16% — is to pay it down as much and as quickly as possible. These kinds of debts can serve as a serious drag on any consumer’s bottom line. And when they are allowed to linger, they grow. In fact, the amount paid in interest over time can in many cases exceed the amount borrowed, resulting in a persistent (and growing) financial burden.
  2. Create an emergency fund — Unfortunately, unexpected expenses are a fact of life. And when the car needs repairs or the basement floods, consumers who don’t have the cash on hand to remedy these misfortunes may have to resort to paying the bills with a credit card — all too often resulting in the financial quagmire outlined above. A good rule of thumb is to try to have at least three to six months’ worth of income stashed away in a rainy-day fund. But if that level of savings just isn’t realistic, putting as much as possible into a savings account can help you weather the storm when costly and unexpected expenses arise down the road.
  3. Fund your future retirement Everyone would like to have enough money saved up to live comfortably in their retirement years. And whether you already have a 401(k) plan going through your employer or not, a tax refund presents a great opportunity to put funds away in an individual retirement account (IRA) and let it grow over time. Consider this: If a taxpayer puts a $3,000 refund away in a retirement account that’s earning an average return of 6% a year and leaves it untouched, he or she will have more than $5,000 in that account in 10 years, all from that single deposit alone. Put that same $3,000 amount into the account for each of those 10 years, and thanks to compounding interest, the $30,000 total put into the account will have become more than $40,000 at the end of the decade. Do the same for 20 years, and the $60,000 total deposited will have nearly doubled to around $120,000.
  4. Improve your home — If you own your own home, investing in it is a way to both improve your daily quality of life now, and increase the value of your home so that you make more money when you sell it later. Further, some home improvements, such as installing new windows or upgrading old appliances, can deliver big energy savings that cut down on your monthly bills, helping you improve your long-term financial position. If you’ve got a home enhancement in mind that your tax refund will cover, investing in it is a great way to boost your at-home happiness and build equity in what, if you’re like most people at least, is your most valuable single financial asset.
  5. … or pay down your mortgage principal For many homebuyers, very little of the monthly payment they make on their homes actually pays down the mortgage principal, as the initial years of payments instead go primarily toward paying off the interest on the long-term home loan. But when extra payments are made — with a tax refund, for example — the full amount of the pre-payment can typically be applied directly toward paying down the principal. And because paying down the principal will reduce the amount paid in interest over time, this can result in substantial savings for the homebuyer over the long haul — not to mention shorten the window to full mortgage payoff.
  6. Invest in yourself — Building on your professional skills is a great way to boost your career prospects, whether it be by earning a salary-increasing promotion or finding a new, higher-paying job. If you feel strongly that acquiring specific, sought-after skills would increase your value in the workplace, consider using your tax refund to pay for the tuition needed to gain the knowledge and expertise that can help you advance your career. In addition, you may be able to deduct the cost of any classes you take from your taxable income, potentially lowering your tax liability — and increasing the amount of your tax return — next year.

Proudly serving South Carolina since 1933, Arthur State Bank offers accounts and services to meet a variety of financial needs. To help you achieve all your financial goals, the bank offers in-person service as well as a range of convenient digital solutions. To learn how Arthur State Bank can help you with banking needs ranging from checking and savings to retirement accounts, mortgages, other personal loans and more, visit arthurstatebank.com.

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AnnualCreditReport.com is the only source for free credit reports authorized by the federal government. Every 12 months, you can get a free copy of your credit report from each agency.

Your credit report has your credit history for all of your credit accounts as well as any credit inquiries and public record court information such as collections. In addition, the report provides personally identifiable information such as your name, address, and employment.

Be sure to carefully review all three reports to identify any problem areas that you may need to clean up prior to applying for a mortgage. If there is any incorrect information, follow the reporting agency’s rules to correct it or add a notation to the report to explain the situation.

Your FICO Score is a score combines data from several areas include payment history, the amount owed, length of credit history, new accounts. Many lenders use this score as a guide. This score is not provided as part of the free annual credit report.

Learn more about how your credit score impacts your ability to secure a loan.


Couple looking over finances

Primary considerations for setting your housing budget require an assessment of your income, debt and current savings for the down payment on the home. The following are generally recommended guidelines; however, you should meet with an Arthur State Bank lender to get personalized mortgage information.


Couple meeting with lender

The pre-qualification/pre-approval letter is included with any offer you make on a house to inform the seller that you have met with a mortgage lender and you are prepared to make an offer. The letter states that based on certain assumptions, the bank is prepared to lend you up to a specified amount of money for a home mortgage.

When choosing a loan officer, we recommend going local to work with someone who understands your community’s real estate market. This blog on first-time home purchases includes questions to ask your lender that may be helpful when preparing for your meeting.

Helpful Resources:


Realtor shaking hands with a client

When a house is sold, the seller typically pays real estate commission to both the listing agent and the selling agent. It is extremely beneficial for the buyer to use their own real estate agent. Loan officers can often recommend selling agents in the area; ask your officer about realtor referrals when discussing your loan.

A good realtor will know the local market and can help you find an ideal home based on your budget, location and desired features. During your search, understand that you will most likely need to compromise on some items, so it’s important to identify your critical needs versus your wants.


Couple searching online for a home

Additionally, when you start with the house search and work backwards, homes can often go off the market while you’re completing steps 1-4. While browsing homes immediately can be tempting, we recommend following these steps in order so that, once you find your dream home, you’ll be well-positioned to take action immediately.

When you find the home you want and you think you are ready to put an offer on it, you will want to make sure you have all the information you need to make a solid offer.

  • Evaluate the neighborhood.
  • Drive by the house at different times of the day.
  • Examine how other houses in the neighborhood are maintained.
  • Consider any potential traffic or other disruptive noise.
  • Is there ample parking for you and visitors?
  • Read the details in any Homeowner Association agreements (HOA fees and rules).

Make sure to do a preliminary check of house details:

  • Check the water:
  • Does it have good pressure?
  • How long does it take to get the water hot?
  • Is it well water or city water?
  • Turn light switches on and off.
  • Open and close doors and windows to make sure they work properly.
  • Review previous utility bill expenses.
  • Consider the property tax bill.


Family meeting with realtor at new house

When writing an offer contract, be sure to pay attention to all of the details.

Offer Price:

Your agent should do a market analysis that pulls data on recently sold comparable houses. The best comparisons will come from the same neighborhood.

If you are asking for the seller to pay some of the closing costs, remember that this cost plus the sales commission determines the net amount you are offering the seller for the house.

Work with your agent on your negotiation strategy. There are many things to consider, such as how badly you want this particular house, whether it is a buyer’s or seller’s market and an assessment of the seller’s motivation to get the property sold.

There isn’t one best strategy.

Be sure to document in writing everything you want included with the house, such as appliances, etc. Your agent should guide you through the contract step-by-step.


  • Home inspection.
  • Mortgage.
  • Final walk through (24 hours prior to closing).

Proposed closing date. Typically, this is 30-45 days from an accepted offer.

A good-faith deposit is required for the offer. This is typically between 1-10% of the purchase price of the house. The deposit is kept in escrow until closing and the money is applied to the purchase price of the house at closing. If the house does not close due to one of the contingency clauses, the buyer receives their money back. However, if the buyer decides not to close on the property, the seller may get the deposit money.

Attach your pre-approval letter to the offer.


Two people in professional meeting

The clock starts ticking for everything documented in the contract, including mortgage application, inspections and closing date.


Woman advising other woman on mortgage application

You will need to decide which mortgage to select prior to the application.

Plan for the following potential fees:

  • Application fee (many banks and mortgage companies charge an application fee; however, there is not an application fee at Arthur State Bank).
  • Credit check.
  • Appraisal (may be paid at closing).
  • Loan origination fee (paid at closing).

Once you have approval for your loan, make sure you don’t change anything that will impact the status of your mortgage. Banks do a final check on credit and jobs just prior to closing, so now is not the time to change jobs or make another purchase on credit such as a car or furniture.


Home inspector going over findings with home owner

Depending on the size of the house, an inspection can cost on average between $300 to $1000.

Many real estate contracts specify how problems uncovered in the inspection will be resolved, up to a certain dollar amount. Should necessary repairs exceed that amount, the buyer has the option to cancel the contract without penalty and receive their deposit money back. Another option is for the buyer and seller to renegotiate who will pay for additional repairs.


Woman happily holding keys to her new home
  • Homeowner’s insurance is required by the lender prior to closing on the loan.
  • Turn on utilities in your name, effective the closing date.
  • Change your address with the U.S. Postal Service.
  • Make moving arrangements.

Three days prior to closing:

  • You should receive your final Closing Disclosure from the closing agency. The final Closing Disclosure shows a column for the seller and a column for the buyer. All closing charges and credits for both the seller and the buyer are documented in the closing statement.
  • Review the closing statement for accuracy prior to coming to closing.
  • The final amount in the buyer’s column shows you the amount of money you need to pay at closing.

The closing office will provide specific payment instructions. Closing funds have become recent targets for cybercriminals. If you are asked to use a wire transfer, call the office and ask to speak to someone you have been working with to double-check the instructions.

Closing day:

In South Carolina, the closing will usually take place at the attorney’s office. Everyone signing for the mortgage must be present to sign the closing paperwork. Make sure you bring the following:

  • Cashier’s check or proof of payment for wire transfer.
  • Driver’s license.
  • Checkbook, just in case there are any additional items that were not on the closing statement.

Be sure to understand this information:

  • How and when you will pay:
  • Your mortgage.
  • Your property taxes.
  • Your homeowner’s insurance.
  • Any HOA dues.
  • Who to call with any questions.

The best practice is to go through the homebuyer’s roadmap in this sequence. However, if you jumped ahead early in your journey, just circle back to address the steps you missed.

Arthur State Bank’s loan officers are closely tapped into local real estate markets and experts at helping clients get what they need on terms that work for them. We also offer mortgage specials for first-time homebuyers.

To start planning your journey to your dream home, try out our mortgage calculator. If you’re ready to talk to a loan officer, contact Arthur State Bank to request personalized mortgage information today. Don’t forget to ask about our first-time homebuyer offer.