6 Ideas for Your Tax Refund to 
Maximize Your 2026 Goals

No one likes filing tax returns, but a refund can give your budget a boost.

For most Americans, the annual ritual of filing taxes is not an activity that comes with excitement and joy. However, according to recent IRS data, approximately two-thirds of individuals or households who file a tax return receive a refund! While the amount varies from person to person, the average federal tax refund in 2025 was $3,167. And the U.S. Treasury is predicting tax refunds may increase by an average of $1,000 this year! Those funds are returned with no strings attached – use the money for whatever you wish. This article will highlight some helpful suggestions so you can make the best use of that refund!

What Should You Do with Tax Refund Money? 

Option 1: Save it

Probably not a surprise, but we’ll begin with some encouragement to save at least a substantial portion of your tax refund. One of the first “golden rules” of managing money is to pay yourself first. Saving helps you build financial security, achieve your personal goals, and prepare for unexpected costs. 

Option 2: Put tax returns into an emergency fund

You can't predict what will come your way, but you can prepare by having money in savings. It's common practice to have 6 months worth of your salary as an emergency backup - especially during a period of unemployment. That way, you can keep your budget the same!

Option 3: Save for a long-term goal

Think retirement and assisting with a child’s college education. Often, this involves investing (mutual funds, ETFs, stocks, bonds). Be prepared for some volatility, but history shows us that over time, the market is likely to provide positive returns.

Option 4: Live life

Here’s where you set goals and direct your dollars to what matters to you most – vacations, home improvements, charitable giving, recreation, holidays, and down payments on a vehicle or home. Want to learn more? Download our FREE savings brochure!

Option 5: Tackle debt

Eliminating or lowering debt can give your finances breathing room. Whenever you borrow money, you are obligated to repay the loan with added interest. That’s why using your tax refund to lower or eliminate debt balances can be a huge boost to your finances.

Less debt always provides your budget more breathing room, especially to save. A well-funded savings account at UMCU can give you more control over your finances, and less stress when making decisions. Savings can allow you to shift careers, move locations, or travel. Every dollar saved is one more step toward living life on your terms.

Review your credit card and loan statements and determine how much interest you are paying each month. Paying down debt with your Michigan tax return can provide quick results and a financial fresh start.

Option 6: Treat yourself

If you’re wondering how to use your tax refund wisely, spending may not seem like the best option. However, developing a positive money mindset has many benefits and we encourage our members to re-frame how they approach their finances. For some, money can be a source of stress, fear, and limitation. Or it can be a wonderful tool to enhance your life, live generously, and open the door to experiences that bring you long-lasting joy.

Consider allocating a portion of your tax refund to an expense that’s been on your mind but a little out of reach lately. There are good ways to spend your refund, if you don’t want to save it or pay down debt. For example:

• A weekend away to visit friends
• A live concert or Broadway show
• A new sofa for those lazy weekends
• A nice meal at a new restaurant getting rave reviews
   

Guilt-free spending isn’t about bypassing your budget. It’s about making sure you spend money in a way that is aligned with what truly brings you value, joy, and peace of mind. Once the essentials are covered, how you spend your money should reflect what matters to you, not anyone else.

Summary 

A tax refund marks a great chance early in the year to set yourself in a better position for the future. You’ve got options, and many people choose to spread the dollars around. One final piece of advice – take your time when considering all your possibilities. If you have questions, please reach out to UMCU – our friendly and helpful team is here to help.