If you’re expecting a tax refund, you’ve probably got some ideas about what you want to do with it. The average refund in 2022 is $3,473, according to the IRS. Shopping spree, anyone?

Not so fast. Although it can be awesome to have fun with your tax refund, consider some other options to make a lasting financial impact. If your refund is near that average figure, you’ll likely have enough to do both.

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Build Your Financial Fitness

If you don’t have an emergency fund, or it’s not where you want it to be yet, your tax refund might get you to your goal. (And if you don’t have an emergency fund, you’re not alone. More than half of Americans don’t have enough savings to cover a $1,000 expense.)

Without an emergency fund, you may have to take out high-interest payday loans or use credit cards to cover an unexpected expense. You may even have to borrow money from family or friends, potentially straining those relationships.

If your refund is near the average, you can set aside $1,000 for emergencies and still have money left for other goals or a fun purchase.

Pay Down Debt

You might have more debt than you’d like; fortunately, your tax refund can help you pay that down. You can use a snowball method to apply your refund, in which you choose the smallest debt and pay it off first, then apply leftovers to the second largest and third largest, and so on. Or you can pay off all or part of your highest-interest debt, then focus on the next highest interest rate and continue in this manner.

Debt snowballing can help simplify your debt payoff plans by reducing the number of different creditors. What’s more, tackling the highest interest rates first can help lower the overall interest you pay over the life of your loans.

Save for College

If you’ve got kids, you might consider putting part of your refund into a college savings plan or dedicated account for their future educational expenses. The younger your kids are when you start saving, the more you can earn in interest as they grow up.

Save for Retirement

A tax refund windfall can help you better prepare for retirement. Depending on the type of retirement account you have, you may be able to save on taxes next year by putting some or all of your refund into your retirement account.

Make sure you keep contribution limits in mind when adding to your account. In 2022, you can deposit $6,000 (or $7,000 if you’re 50 or older) in a tax-deferred account or Roth IRA. Your income and whether an employer-sponsored retirement plan covers you may affect these limitations and the tax deductibility of your contributions, so please contact your tax professional for specific advice on your situation.

Take a Trip

If it’s been a while since you left your home island, you might enjoy a trip. The benefits of visiting family on the mainland or just taking time off work to go somewhere different can be long-lasting. Figure out the logistics and take that time off. You’re likely to return home refreshed and full of new experiences.

Improve your Home

Although costs are currently high and many home improvement professionals are booked solid, even minor improvements can make a big difference for your home. If you have a significant project planned, your tax refund can help pay for it in full or lower the amount you need to borrow to cover it. And there are some DIY upgrades you can make that will benefit you, such as installing more ceiling fans, weatherproofing your home, or fixing drips on inside and outside faucets.

Invest in Yourself

Want a real long-term benefit? Learn a new skill that can help you earn more at work. Many skill-building courses are available online or at one of our community colleges.

Start your dream business. Even small amounts of seed money, such as a few thousand dollars from your tax refund, can give you what you need to start a small side hustle or something you can grow into a replacement for your full-time job.

As you plan what to do with your tax refund, balance your long-term goals with your short-term wants for the most benefit.

Schedule an appointment to discuss your options.