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What to Do with Your Tax Refund

April 1, 2010

Cindy Battles

This is the time of year when I get hopeful; hopeful for Spring and hopeful for everyday’s mail — that it will bring my tax refund.

Why not do something responsible with your tax refund this year? Do you really need that new, big-ticket item? Or is this the year (and the economy in which) to save?

How about this: allow yourself to blow 10% of your refund so you feel better about saving the rest. In my case, that’s approximately 2 years of double-shot iced mocha lattes. With the rest, I suggest you resist temptation… and I offer these saving/spending ideas:

1. Pay Down Debt — I don’t have credit cards so I don’t have to worry about this. I make do with a VISA debit card which stays up to date. But many people do have credit and it’s a good idea to make some headway on your credit card bills with the chunk of change that comes in your mail this tax season. More here on managing credit.

2. Save in an Emergency Fund — Only about three in 10 U.S. households have enough savings to get them through three months of unemployment. That’s a little scary tidbit from the U.S. Bureau of Labor Statistics. It may seem quixotic — it might not be enough — but it won’t hurt to save your refund for the unexpected. Every little bit helps. Auto repairs, for example, can sky-rocket to $800 or more from nowhere and eat up your funds… so having an emergency fund to draw from is the way to save.

3. Take a Course — If you want to keep yourself employable or boost your earnings, you may need to learn new skills. Save the money until you find the course that best suits where you are at right now and where you want to go. Then invest in your future.

4. Go to a Conference —This is the mini version of the above. A one- or two-day fee-based work conference can allow you to network, get your business card passed around, meet and greet. It can be an effective way (by passing out resumes) to combat unemployment. It may use up your refund to attend but could also pay off heavily.

Your tax refund may be a big piece of temptation. Save or spend it wisely and you’ll be glad you did.

Cindy

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