If you're expecting a check from the IRS after you file your tax return, what will you do with the money? Some ideas to help your bottom line.
You could buy a car, remodel the house or take a vacation with the money you get from your tax refund. What should you do with that check? Pay off credit card debt, of course. It’s a quick way to see at least a 15 percent return on your money.
Five Ways to Spend Your Tax Refund:
- Pay off your credit card with the highest interest rate first. Even if the money from your tax refund barely makes a dent, at least it’s a head start. The more you can pay off now, the less interest you’ll owe down the road. After you make the payment, call your credit card company and ask for a lower rate. If your payment history is good, chances are, they’ll do it for you. And it wouldn’t hurt to tell the person on the phone about all the other offers you’ve gotten in the mail. Getting nowhere with the company representative? Don’t hesitate to ask for a manager. Credit card companies want to keep your business.
- Contribute to your 401k at work or a Roth IRA. If you’ve paid off your credit cards already, it’s time to start saving for retirement. Put the maximum amount your company will match into a 401k. If you don’t have one, consider opening a Roth IRA. By making automatic contributions from your checking account every month, you won’t even miss the money.
- Begin a college savings plan. The college savings plan network gives you a state by state listing of 529 savings plans and access to a college cost calculator. Even though you will receive certain tax advantages by investing in your home state’s plan, don’t overlook other states which may offer investment strategies you like better. Don’t have a kid to send to college? Finance your own return to the ivy covered walls.
- Pay down your mortgage. By paying more each year, you’ll shorten the length of your loan, meaning you’ll pay a lot less interest over the long term. In fact, if you can swing it, refinance from a 30-year to 15-year home loan. You’ll have your house paid off in time to enjoy retirement.
- Invest in gold, silver or commodities. Start with a commodities mutual fund. These are good inflation hedges in tough economic times. But be sure to consult with a qualified stock broker or certified financial planner to find the best investment strategy for you.
The copyright of the article What to Do With Your Tax Refund in Consumer Education is owned by L. Marie Dubuque. Permission to republish What to Do With Your Tax Refund in print or online must be granted by the author in writing.
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