After processing tens of millions of tax refunds in March, the Internal Revenue Service reports that tax refunds are averaging about $3,000 this year. Feel free to partake in a collective high five all around, folks.
With that hefty check on its way to your mailbox or already in your hands, the next step is the fun part -- what to do with all that money.
A recent Huffington Post article points out getting a big tax refund typically makes people feel guilty. A significant tax refund means you likely withheld too much on your paychecks when you should've been paid (and potentially earned interest on your fatter paycheck) throughout 2011. Somehow, we manage to turn those guilty feelings into something that feels pretty good; our large cash windfall usually plays out two different ways.
Some of us put our tax refund toward smart money strategies such as starting an emergency fund, boosting your current savings, paying down credit card debt, or adding an extra payment to your loans or mortgage. Essentially, your tax refund allows you to invest in yourself or plug a few financial holes.
And some of us are simply in the mood to spend.
Make this year an opportunity to stretch your tax refund and do something truly awesome for someone else. When Uncle Sam turns your miscalculated withholdings into lemonade, here are three ways to turn that lemonade into a lemonade stand for the whole neighborhood.
1) Kickstarter: Thanks to Kickstarter, you can help transform the term starving artist into sustainable artist (also, superstar artist). The crowdsourced funding platform allows people to post their creative idea, from a kit that turns your iPod Nano into a watch to a female comic anthology appropriately called Womanthology, and for anyone to contribute $1 or $10,000 toward making their dream project come true. There are projects in diverse categories from design to food to music, so there's likely to be one out there you're interested in (because creating an animatronic puppet is your childhood dream too!). Plus, all backers get a piece of the end product. If you've ever wanted to be an investor in something awesome, here's your chance.
2) FirstGiving: If you've gotten the itch to donate to a local charity but never scratched, you can do it in as many clicks as it takes to update your Facebook status. FirstGiving modernizes charity fundraisers, enabling you to easily and securely donate to nonprofits and individual causes all over the world, or right in your neighborhood. It's also incredibly easy to see your impact on each cause's goal and just how much your money can help. For example, you can help Mr. Jerico raise money to support middle schools in Oakland, where just $5 can buy pencils to finish their homework or $300 can help sponsor a school bus for field trips. For those of you who want to see your money go to a local cause you believe in, here's your chance.
3) Kiva: "Empower people around the world with a $25 loan." If that's not a compelling call to action, I don't know what is. Non-profit organization Kiva helps you make "micro-loans" to entrepreneurs in impoverished communities in 60 countries. In fact, LinkedIn founder Reid Hoffman loaned Kiva $1 million and invited 40,000 people to use his money to lend to the borrower of their choice (some of the $25 credits are still available). With a 98.94 percent repayment rate, consider microloans a safer investment than most options in the market. While you won't receive interest on the microloan you're financing (Kiva doesn't take a cut either), you get updates on your microloans, such as helping Elena buy fruits and vegetables in the Philippines or helping El Hadji sell cloth and dressmaking supplies in Senegal. At the price of people's weekly allotment of venti frappuccinos, here's your chance to help global entrepreneurs succeed.
While it might feel painful reaching into your paycheck or savings account to donate to a good cause, tax refunds often feel like extra cash to many people. And for those of us who usually splurge on a vacation, new spring wardrobe or toys for the kids, a tax refund is a reason to be frivolous. This year, consider it a reason to be generous.
Justine Rivero is the Credit Advisor for CreditKarma.com, a free credit management website that helps more than 5 million consumers access their truly free credit score and free credit monitoring.
Originally published in Forbes.
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