5 Things to do with your Tax Refund.

Over $300 Billion in tax refunds is expected to be paid out to Americans this year.  What are you going to do with your piece of the pie?  Here are 5 suggestions:

1.  Pay Down Debt.

With interest rates on credit cards averaging 13 to 14 percent, paying down your debt is one of the smartest things you can do with your refund check.   If you are behind on your mortgage, car or credit cards, pay these first to avoid penalties and potentially high interest charges, as well as the possible loss of property.

2.  Establish or replenish your Emergency Fund.

Generally, you should have six months’ worth of living expenses set aside to fund your living expenses while unemployed.  If you don’t, use some of your tax refund for that purpose.  Place these funds in an interest-bearing money market fund or savings account.

3.  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.

4.  Closing Costs on Refinancing.

Record low interest rates are making this a very attractive opportunity.  The average rate on the 30-year fixed-rate mortgage recently fell to an all-time low of 4.78%.  This move can significantly reduce your monthly mortgage expense, as well as the financial burden while you look for work.

5.  Save your Sanity.

Treat yourself to a short vacation, shopping spree, or massage.  There are countless ways to have some fun and relieve stress during this tough time – without breaking the bank!  An investment in yourself may ultimately pay the most dividends.