What To Do With That Tax Refund

If you’re expecting a refund on your taxes this year, you should think about using it to improve your financial life. About two-thirds of the people who file get a refund, and the average amount is around $3,000. Here’s what you should do:

1. Save It — 44 percent of taxpayers plan to stash their refund. a. Contribute to a retirement account — You can still contribute for last year until April 17 and potentially improve your refund, up to $5,000 for people under 50 and $6,000 for those over 50. If you’re self-employed, and you file an extension, you can contribute to your retirement account until Oct. 15 (up to $49,000). b. Max out flexible savings account. Next year, the max amount will be curbed and this year is the last year to use FSA to pay for an orthodontist. c. Buy savings bonds — You can buy up to $5,000 per year and invest directly with your refund. d. Save for other goals (college savings, home purchase, etc) — You can split your refund into four different buckets. 2. Pay down debt — 40 percent are planning to reduce debt, so try a credit card you can eliminate or pay down highest interest cards first. 3. Use for everyday expenses — 29 percent plan to spend on everyday items. Consider getting a better deal, like asking your gym about a discount if you prepay for a year. Invest in home improvement projects. Consider car insurance savings account. Then you can increase your deductible and save on your premiums. 4. Buy a big ticket item — 12% will splurge on a major item like a TV or iPad, etc. If you need a forced savings plan, use your tax refund. 5. Give it away — Instead of waiting until the end of the year for your charitable giving, consider using some of your tax refund. 6. Do Something for yourself, like going back to school or taking up a new hobby.