Smart Ways to Use Your Tax Refund in 2025

Maximize Your Tax Refund: The Best Financial Moves You Can Make

As a CERTIFIED FINANCIAL PLANNER® professional, I know how exciting it can feel to receive a tax refund. I still remember when I got my first one. At 15, I had just started working my first job, and like clockwork, my parents handed me my tax refund. To me, it was nothing more than free money, so, naturally, I did what any teenager would do. I bought things I didn’t need and enjoyed every second of spending it.

It wasn’t until a couple of years later, at 17, that my mindset shifted. That’s when I stumbled upon the world of investing. Suddenly, money wasn’t just something to spend—it was something that could grow. I began to see how financial decisions, even small ones like what to do with a tax refund, could shape my future. Looking back, I wish I had someone to guide me, to tell me that even a little financial planning could go a long way.

Now, as a CFP® professional, I help others avoid the mistakes I made. That’s why, as Your Friendly Neighborhood Wealth Management Advisor, I want to show you how to turn your tax refund into something more than a fleeting shopping spree. Instead, let’s make it a tool for financial security and long-term success. However, financial planning is not a one-size-fits-all approach. What works for one person may not be the best option for another. Before making any major financial decisions, it's always wise to consult with a financial advisor to ensure your refund is put to the best possible use based on your unique financial situation and long-term goals. Some may benefit more from simple savings strategies, while others might need more advanced financial planning techniques.

Each profession and financial journey is different, and that’s where personalized financial advice makes all the difference. Whether you’re a professional athlete navigating unpredictable income cycles, a student-athlete balancing NIL deals with your education, a young professional building your financial foundation, an entertainer managing irregular cash flow, a small business owner reinvesting in growth, an educator planning for financial security, or a married couple preparing for the future, your approach to financial planning should fit your lifestyle—not the other way around.

Table of Contents

• Maximize Your Tax Refund: The Best Financial Moves You Can Make

• Pay Off High-Interest Debt

• Build Your Emergency Fund

• Contribute to Retirement Savings

• Invest for Long-Term Growth

• Save for a Major Purchase

• Fund Your Child’s Education

• Boost Your Career or Skills

• Give Back and Support Charitable Causes

• Treat Yourself—Responsibly

• Final Thoughts: Make Your Tax Refund Work for You

A tax refund can fund many different financial goals.

Pay Off High-Interest Debt

Not all debt is created equal, and deciding whether to use your tax refund to pay it off depends on your unique financial situation. If you’re carrying high-interest credit card debt, paying it down can be one of the best financial moves you can make. It frees up future cash flow, improves your credit score, and reduces financial stress. But if your debt is low-interest or strategically used, your refund may be better allocated elsewhere, like investments or business growth.

For example, small business owners might prioritize reinvesting their tax refund into their business rather than aggressively paying down lower-interest loans. Professional athletes or entertainers may benefit more from liquidity and diversified investments rather than putting all their refund toward debt repayment. Educators, who often balance student loans with other financial obligations, may want to focus on paying down loans that have the highest interest rates. A financial plan should match your personal financial journey—one size doesn’t fit all.

Build Your Emergency Fund

Life is unpredictable, and having a solid emergency fund can provide financial peace of mind. But how much should you save? It depends on your lifestyle and job stability.

For married couples with stable jobs, a three-to-six-month emergency fund may be enough. If you’re single or in an industry with fluctuating income, like entertainment or athletics, having six to twelve months of expenses in savings might be more appropriate.

For those in unpredictable careers, such as actors, musicians, influencers, and professional athletes, an emergency fund should account for the natural ups and downs of your profession. Educators, who may have stable but often underfunded salaries, might want to ensure their emergency fund is well-stocked to handle unexpected life events or career transitions. Unlike a salaried employee in a corporate setting, you may go months without steady income, so a larger financial cushion is essential to ensure stability.

Contribute to Retirement Savings

Retirement planning is important, but it’s not the same for everyone. While contributing to a Traditional IRA or Roth IRA is a great option, some high earners, such as professional athletes, entertainers, and business owners, may not qualify due to income limits. Instead, they might explore a Backdoor Roth IRA, SEP IRA, or Solo 401(k).

If you’re a young professional and a student-athlete, starting early with retirement savings can give your money more time to grow, even if you start with smaller contributions. Educators, who often have access to 403(b) retirement plans, may want to maximize their contributions, especially if they receive employer matches. A financial plan should fit your current situation, not a generic formula.

Invest for Long-Term Growth

Investing is an important part of building wealth, but the right strategy depends on your goals, income, and risk tolerance. Young professionals and student-athletes may be comfortable with high-growth stocks, while small business owners might need liquidity for reinvesting. Entertainers and athletes, who may have a few peak earning years, often need a different investment strategy focused on long-term sustainability. Educators, who may have a more stable income, could benefit from steady, tax-advantaged investments that align with their long-term security goals.

A tailored investment plan ensures that your money works for you based on your unique circumstances, not just a general market strategy.

Save for a Major Purchase

If you’re planning a big purchase, such as a home, car, or business investment, your tax refund can serve as a great financial boost. Married couples may use it as part of a down payment for a home, while small business owners might reinvest in expanding their operations. Educators may use it to pay for classroom supplies or fund professional development, while entertainers and athletes could set it aside for large expenses that come with their profession, such as travel, training, or equipment.

Married Couples can use their tax refund to begin saving for a home purchase goal.

Regardless of the purchase, the key is intentional planning to ensure that spending aligns with your financial goals.

Fund Your Child’s Education

If you have children, investing in their future is one of the best uses for a tax refund. A 529 Plan allows your money to grow tax-free when used for qualified education expenses. Educators, in particular, may be keenly aware of the rising cost of education and want to ensure their children have financial support for college. Small business owners and entertainers with variable income may prefer front-loading a 529 plan when they have a surplus.

Not every family will benefit from a 529 plan, and some may need alternative education savings strategies. Consulting with a financial advisor can help determine the best fit.

Boost Your Career or Skills

A tax refund can be an investment in yourself. Whether it’s obtaining a new certification, taking specialized training, or attending industry conferences, enhancing your skillset can increase earning potential. Young professionals might use their refund for career-advancing certifications, while educators could pursue higher education credits to qualify for salary increases. Small business owners may take business management courses, and entertainers might invest in acting classes or media training to advance their careers.

Professional growth is one of the best ways to increase long-term financial stability, and using a tax refund for career development can be a smart move.

Give Back and Support Charitable Causes

Giving back can be rewarding, but how you approach charitable giving should align with your financial strategy. Educators may prefer supporting scholarships or local education programs, while professional athletes and entertainers might establish foundations or sponsor community events. Small business owners may choose to donate to causes that align with their company’s mission. Making a charitable contribution can also improve your taxes for the next year due to available charitable deductions.

Structured giving, such as using a donor-advised fund, can maximize tax benefits while ensuring long-term philanthropic impact. A financial advisor can help determine the best charitable strategy for your financial situation.

Treat Yourself—Responsibly

A tax refund is a great opportunity to enjoy life, but spending should be intentional. Professional athletes or entertainers might set aside a portion for experiences they enjoy while ensuring their financial plan remains intact. Small business owners could upgrade their workspace or invest in personal development. Young professionals might treat themselves to travel while still saving for their future. Educators, who often spend their own money on classroom supplies, may use a portion of their refund for self-care or professional enrichment.

Young professionals may use their tax refund to travel while saving for their future.

You’ll often hear financial influencers online touting the 50/30/20 rule: 50% for goals, 30% for needs, 20% for wants, as if it’s a one-size-fits-all solution. It may sound smart, but the truth is: they don’t know your financial situation. As a goal-based financial advisor, I take a different approach. I help you align your tax refund with your unique lifestyle, goals, and priorities because your financial journey deserves more than a cookie-cutter formula.

Final Thoughts: Make Your Tax Refund Work for You

A tax refund isn’t just extra spending money, it’s an opportunity to take control of your financial future. But without a plan tailored to your career, lifestyle, and goals, it’s easy to let that money slip through your fingers. Whether you’re an athlete securing long-term wealth, a student-athlete navigating making money through NIL while balancing education, an educator planning for financial stability, a business owner reinvesting in growth, or a young professional building a solid foundation, let’s create a customized strategy that makes your tax refund work for you.

As Your Friendly Neighborhood Wealth Management Advisor, I’ve helped clients turn their tax refunds into stepping stones for long-term financial success. If you’re unsure how to maximize your refund this year, let’s chat! Schedule a complimentary financial assessment today, and together, we’ll build a plan that aligns with your financial goals and sets you up for lasting success.