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Five Useful Ways To Spend Your Tax RefundThis year, consider spending your tax refund on something productive. We'd like to offer a few simple, fruitful ideas ranging from paying off some credit card debt to furthering your education. 1) Reduce Credit Card Debt – One of the best things you can do is pay off high interest credit card debt. Start with the highest interest rate card first, and put as much toward that card as possible until it is paid off. If you can use your refund to pay off all your credit cards do it! It will shave months of paying the minimum allowable amount, and hundreds, if not thousands, of dollars in interest. Most card interest rates balloon into the twenties or high teens once the teaser rate has worn off. Make sure you read your statement carefully, the current interest rate is usually not prominently displayed, even though it should be. Consider this, a credit card with a $5,000 balance and a minimum payment of just 3% of the outstanding balance will charge will take almost 17 years to pay off at that rate, and at a cost of over $10,000. Try to avoid cards with short term teaser rates, as it is easy to forget when those rates wear off. Also remember, as part of most card agreements, once you make the first late payment or skip a payment in general, the card companies are usually able to to charge fees and increase your rate. Added fees and increased rates can cause you to pay on your card longer than necessary. Once you have paid off the credit card debt, move on to the next suggestion. 2) Start a Savings Account – Having a savings account is a necessity, and you should work hard toward making it a reality for your family. You can expect things like car repairs, gas price increases, medical emergencies, and home repairs; they are, unfortunately, a fact of life, and they cost money. Having a savings account to cover at least six months of normal expenses will help you pay for these life emergencies, and avoid using a credit card to pay for them. If you get a tax refund this year and don’t currently have credit card debt you should definitely put some money toward a rainy day savings account. Don’t worry about amounts, just start small and watch your money grow. Check with local banks and get the best interest rate you can. Don’t expect to earn more than 1 percent on your money, and stay away from bonds and CD’s, they tie your money up for too long, which defeats the purpose of the emergency savings account. Some banks, however, have a liquid CD, which offers CD type interest rates, but high liquidity, which means you can get your money in a pinch without paying a withdrawal fee. 3) Back to School – It’s never too late to add to your education. The government has several programs to help people of all ages go back to school, whether that means a private college or university, local community college, and even technical schools. Most costs associated with going back to school and continuing your education are deductible on your next tax return. Some expenses are even offered as a credit on your taxes. Another advantage of furthering your education is the possibility of a salary increase when you return to work. 4) Repair not Replace – Replacing things around the house can become expensive. New furniture, a new car, toys for the kids are nice, but they can eat into your savings quicker than you can imagine. If there are a few items around the house than can use your attention consider using your tax refund to repair them rather than replacing them. For most items, repair will cost significantly less than replacement, saving you money to be used on other items from this list, or for some personal down time. 5) Donate to a Charitable Organization – The first four items on this list are designed to put you in a better position financially, but number five is designed to help others. If you have some money left over from your tax refund consider donating to a local or national charitable organization. There are thousands from which to choose including everything from medical research to local community development and student scholarships. Pick one, learn more about its donation policy, and put the check in the mail. When you donate to charity you know you are helping others and you might even get a further write off on your next tax return. It’s a win-win. So this year, if you expect a refund at tax time don’t do the same old thing and squander those important funds. Think about where that money could be spent to put yourself in a better situation financially. You don’t have to stick to this list, though these tips do provide a good starting point. Don’t be afraid to take a few dollars for yourself in the process. Have a meal out or buy a board game the whole family can enjoy. Whatever you do, resist the temptation to spend the money in the old familiar places. Start at the top of the list and work your way down methodically until all the refund money is spent, and remember to keep the list handy for next year’s return as well.
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