It’s a bit like our New Year’s Resolutions: we all have such good intentions towards our tax refunds. We plan to pay down debt, give generously to charity, invest or just plain save for a rainy day. But somehow, that refund check ends up in our checking account where it gets whittled away in small shavings or big chunks. This year, resolve to use that money wisely. Here are some suggestions on how to get the best return on your refund:          

1. Pay down high-interest debt. OK, paying a credit card bill probably isn’t as exciting as the shopping that led to that bill, but the potential reduction of interest you’ll pay and the possible boost to your credit score can be pretty thrilling. Start with your highest interest-rate debt first, to get the most bang for your bucks.
2. If you really have to spend that money, buy smart: how about an energy-saving appliance that will save you money and also get you a tax credit? Check the Energy Star website for ideas.
3. If home improvement doesn’t excite you, maybe a little self-improvement will. Is there a community college or university near you where you can take classes to further your career, expand your employment opportunities or learn a skill you’ll no longer need to pay someone else for (bike repair, restoring old furniture, cooking)? While the classes may cost a little money, you could end up earning or saving money in the long run.
4. Start that emergency fund you’ve been talking about, or boost your existing fund if it could use a boost.
5. Invest in your future. An IRA or Certificate is a great gift to future-you!

According to the Internal Revenue Service, the average tax return for Americans is around $3,000, so perhaps you can budget yourself a little bit to buy yourself and your family a treat. But the key word here is “budget.” Be realistic about what you can afford to spend, allot yourself that much and no more and don’t exceed it.  Have a plan for the rest of your return and stick to it. You’ll be glad you did.

Filed under: Uncategorized by admin