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Using Your Refund Wisely

It is April 15th and I happend upon the following suggestions for those who overpaid the government last year.

1. PAY DOWN DEBT. With interest rates on credit cards averaging between 13 and 14 percent, paying down your debt is one of the smartest things you can do with your refund check.

2. FUND YOUR RETIREMENT. Consider investing all or at least some of your tax refund in a tax-favored retirement account. With a traditional IRA, your earnings grow tax-deferred and if you meet certain eligibility requirements, your contribution may be tax deductible. Contributions to a Roth IRA are not deductible, but withdrawals are tax-free if certain conditions are met.

3. ESTABLISH OR REPLENISH AN EMERGENCY FUND. Generally, CPAs say you should have six months' worth of living expenses set aside in case of a job loss or emergency. If you don't, use some of your tax refund for this purpose.

4. DO SOME PREVENTIVE MAINTENANCE OR IMPROVEMENTS. Are there some minor repairs you could make today that would spare you a larger expense down the line –- for example, a new roof for your house or tires for your car?

5. TAKE A VACATION. If you've been working hard all year and saving regularly, a well-needed vacation may be in order. Spending quality time with your family is a good investment, as long as you are not under any other financial strains.

I'll add one more: GIVE TO CHARITY

Source: Texas Society of CPAs (http://www.ValueYourMoney.org)

Posted by tim at April 15, 2005 12:30 PM

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