Smart Uses for Your Tax Refund...

A tax refund is always a welcome bonus. Whether it’s $300 or $3,000, the way you use that money can have a real impact on your personal and financial well-being. Before you spend your refund, try to think through all the options – even ones that aren’t especially glamorous. Joyce Cavanaugh, Extension Family Economics Specialist with Texas A&M AgriLife Extension Service offers some great tips that can be a helpful guide as you make those decisions.

Follow Three General Rules

1.         DO plan ahead before spending your refund. Without a plan, you may use the money on the first important thing that comes to mind and then later realize something else was more important. Planning ahead and involving the family increases the chances you will identify all the possibilities and think about which ones are most important.

2.         DO devote a portion of your tax refund to build long-term financial security.

3.         DON’T throw away part of your refund on preparation fees and/or loan fees. Did you know that those companies that offer “quick refunds” are just giving you a loan?  It’s a high-cost, high-risk loan.  Look for FREE tax preparation programs like VITA (http://irs.treasury.gov/freetaxprep/) and AARP’s TaxAide (http://bit.ly/hnF42p).  Trained volunteers can assist in preparing your return and file it electronically for FREE.  Or, use the FREE File program on www.irs.gov to do it yourself.   By using one of these free programs and having your refund direct deposited into a checking or savings account, you can get your refund in 7-10 days.

Five Smart Uses for Your Tax Refund

1.         Pay off bills.

· Your first priority is to pay your regular monthly bills if you have fallen behind (utilities, phone).

· Most other debts should be prioritized, with highest interest rate debts being paid off first.

2.         Save for needs in the coming year.

Having money saved for emergencies can get you through small emergencies, like car repairs or medical bills, without breaking a sweat.  In the ultimate emergency (loss of income), an emergency fund can keep you afloat until you find another income source.  Those big bills that come once a year or every few months (car insurance) can cause huge problems for families. Avoid those problems by being ready for the bills!  Use your tax refund to start a special savings fund. Then, keep adding to it throughout the year.

3.         Long-term savings!

You can make progress toward long-term goals, and your tax refund can help make that happen. Even small amounts add up. Adding just $500 a year into a retirement account, such as an IRA, can make a difference over a period of decades.

4.         Special purchases.

What about that new refrigerator or washer and dryer? Those purchases are valuable, too. Some may even be essential, while others simply add enjoyment to life.

5.         Invest in yourself.

Take a course or workshop that will improve your job skills!  If you’ve been looking for a way to get a better job and increase your salary, money from your tax refund may be the answer. Check out program offerings at Weatherford College Wise County Campus!

Your best bet is to first put some of your tax refund toward financial security, then use part of your tax refund to make your day-to-day life better. Amount all the items on your “wish list,” choose the most important, and shop wisely for it!

For additional information on making wise choices for your tax refund, contact the Extension office at 940/627-3341.