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Getting a tax refund? Savvy ways to spend it
SAN FRANCISCO (3/18/14)--If you're getting a tax refund, you're one of more than 40 million Americans receiving one. Financial experts say the best thing to do with a refund is to pay down debt, build up emergency savings, or put it toward retirement savings ( March 5).
But, if you plan to spend your refund, or part of it, here are some savvy ideas:
Prepay bills. Get ahead of monthly bills by paying some ahead of time, or double up on payments. Consider paying extra on your auto insurance premium or, if you know you have an expense coming up--say kids' sports--pay for it now instead of waiting. You'll get the best bang for your buck if paying ahead leads to a lower overall price tag, such as paying down a car loan to save on interest. On the other hand, buying new tires could save money down the road since you might be extending the car's life.
Pursue education for yourself or others. Take classes that might help you advance your career or that will help you pursue that new job you've dreamed of. If you're not interested in taking classes, deposit the refund in a 529 plan or other college savings plan for your kids.
Buy health insurance. Pay for extra health insurance costs. This year's tax season is the only one that will overlap the open enrollment period for the Affordable Care Act, which ends March 31. Future enrollment periods will end earlier. If you're signing up for private insurance, using your refund can help immensely. Say you're a 27-year-old paying about $310 a month, the average cost for a low-cost plan. The average $3,000 tax refund could cover about 10 months of premiums. Also, consider using your refund for deductibles or prescription costs before full insurance coverage kicks in.
Give your home a mini facelift. Consider replacing old appliances with energy-efficient ones, which may qualify you for a tax break. Or, put the money toward other home improvements such as remodeling a kitchen or bathroom.
Enjoying your refund is easy. Talk to the professionals at your credit union about getting your refund directly deposited into one or several accounts.
For related information, read "Eight Ways to Make the Most of Your Tax Return" in the Home & Family Finance Resource Center.
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