Wise Ways to Spend Your Tax Refund

Getting a tax refund every year is like "Christmas all over again" to many Americans. Starting in January, I start hearing wish lists from family members and friends. Someone is planning on buying a new motorcycle with their expected windfall, while someone else wants to plan an exotic vacation. While using a portion of your tax refund to "splurge" on something you really want or need is a fine idea, blowing the whole wad on unnecessary things is a real waste.

Not everyone dreams of tooling down the highway on a new Harley or vacationing in the Far East by using the money they get back from Uncle Sam. According to a recent survey, almost half of the smartest Americans will use their income tax refunds to pay off credit cards or lessen other areas of debt they have. Not only will they reduce their debts, but they'll also save money on interest they would have paid. They aren't just "spending" their refunds, they're using it to improve their financial situations.

A thrifty friend of mine used part of her tax refund from last year in much the same way. She divided it up so she could pay an extra eighty bucks a month on her car payments this year. (She spent the rest of the money.) The results? She was able to pay her car off six months early and get out from under the financial weight of having a car payment.

If you have a house mortgage, you can pay a chunk of your refund on the loan. This financial maneuver can lead to a significant savings in the amount of interest you pay on your loan.

The average income tax refund, which equals about $2,500., can be make a nice "Reserve Fund" in case of emergency. Another survey estimates that more than half of Americans who have kids under the age of eighteen live "paycheck to paycheck." That means, if their car needs repaired or the washing machine decides to make its last spin, many people will be forced to use their credit cards or borrow the money from another source. Having that couple of thousand dollars in a savings account, instead of spending it, could be a real lifesaver for their all-ready-tight budgets.