Your Tax Refund, but Make It Strategic

Tax season has arrived, and for many of us, that means tax refund season has joyfully arrived, too. The temptation to treat yourself might not be stronger at any other point in the year. We get it—and there’s absolutely some merit in taking care of yourself, no judgment here. However, as your friendly neighborhood credit union, it’s also our job to remind you that tax refunds can be a great jumping-off point for new financial stability. Let’s look at some options for saving, paying down debt, and funding future goals.

KNOW YOUR NUMBER

The first thing you’ll need to know is how much you’ll be receiving. Confirm the exact amount, when it’s coming, and how it will arrive. Now is the time to make sure you have a checking or savings account ready to receive the funds. The IRS is moving away from issuing paper checks, so you’ll need an account ready to accept direct deposit.

If you’ve had trouble banking in the past and need a second chance, consider our RISE Checking accounts—they’re designed for people in that exact situation. Once you know your number, create a simple mini-plan. Even the best intentions can disappear quickly without a plan once the money hits your account.

BUILD YOUR SAFETY NET

Whenever you get an influx of money, a smart first step is to start or strengthen your emergency fund—even if you’re currently in debt. Saving now may help you avoid taking on more debt later. Think about the kinds of surprises that can throw your budget off: unexpected car repairs, medical bills, or a job change.

A common guideline is to aim for at least three months of expenses set aside for these situations. That can feel like a big hill to climb, so start with a goal of $500–$1,000 and keep building. Big goals are reached through small, consistent wins. We suggest putting this money in a dedicated savings account to reduce temptation. If your savings begin to gain real traction (think $20,000 or more), that’s a good time to explore an Elite Money Market Account so your money can earn interest while it sits.

TACKLE HIGH-INTEREST DEBT

If your emergency fund is in a healthy place, paying down high-interest credit cards or personal loans can be one of the best “returns” on your refund. High-interest debt keeps you paying for the past; even when you make the minimum payment, much of it may go toward interest instead of the actual balance. The debt barely moves, but the interest keeps growing—it’s like trying to walk up an escalator that’s headed down.

Prioritize debts with the highest interest rates. Put a lump sum from your refund toward that one balance while you continue to make minimum payments on everything else. This strategy can maximize your long-term savings. It may not feel as exciting as buying a new TV, but next month (and next year) you’ll be glad you did.

INVEST IN FUTURE GOALS

If you’re in good shape with both your emergency savings and your debt, you’re ready to think about future goals. Do you want to buy a home or a car, fund a child’s education, go back to school yourself, or start a small business? Your tax refund can be a powerful jump-start toward those dreams.

Consider creating a separate savings “bucket” or sub-account for each major goal. If your budget allows, automate a small, ongoing transfer into those buckets. That way, your refund becomes the launchpad—not the whole journey.

TREAT YO’ SELF (INTENTIONALLY)

It’s more than okay to keep a portion of your refund for something fun or meaningful. In fact, building that into your plan can help you stay motivated. Maybe you decide that 80% goes toward savings, debt, and goals, and 20% goes toward a treat. The key is to make it intentional, not a spur-of-the-moment splurge that leaves you feeling guilty later.

MAKE LIFE EASIER YEAR-ROUND

If you received a significant refund and expect your financial situation to stay similar this year, it might be time to revisit your W‑4. You can adjust your withholdings, so you receive more in each paycheck instead of a large lump sum at tax time. That can help smooth out your cash flow and make it easier to meet monthly needs and savings goals.

IF YOU’RE JUST GETTING BY

If you’re using most or all of your tax refund for essentials—like groceries, medications, or utility bills—this guidance may feel out of reach right now. That doesn’t mean it’s not for you; it just means you’re in a different season. Staying current on essentials is a vital financial win, and it’s okay if that’s your main focus today.

As things stabilize, even small steps—like setting aside $10–$20 at a time or learning more about budgeting and credit—can start to shift your financial picture. Financial knowledge is power, and you deserve access to it. Keep an eye out for our community events and resources on financial literacy; they’re designed to support you, not judge you.

WHAT TO DO NEXT

If reading this has you thinking you may need a different kind of account to meet your needs, we’re here to help. Visit your local OnPath branch or reach out to us online. An OnPath team member can walk through your situation, offer personalized guidance, and help you choose the accounts and tools that best support your goals.