Dreaming About a Tax Refund?

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Instead of rushing out and spending your refund, though, consider treating yourself to a bit of financial happiness and reduced stress. How can you do that? Follow a few money-saving tips.

Are you expecting a tax refund this year? If so—and if you’re like millions of other Americans—you’ve probably already begun to plan how it will be spent.

Pay off credit card balances. Use your refund to pay off any outstanding credit card balances. You've worked so hard for your money, so don't just give it away to the credit card companies. Each year consumers lose millions of dollars paying interest on credit card balances.

Save for college. Do you have a college education bill looming in the future? With the rapidly rising costs for a college education, a mutual fund may be just the place for your refund (especially if your kids are more than four years from graduation). If your kids are in high school already, a certificate of deposit (CD) or money market account with check writing privileges may be a better alternative.Either way, $1,000 earning interest over a couple of years is smarter financial choice than a big screen TV today and a student loan tomorrow.

Add money to (or create) your emergency fund. Individuals are advised to have an emergency fund amounting to six months' worth of living expenses. Using your tax refund here is a good place to start.

Save for holiday shopping. Do you remember how expensive holiday shopping was this past holiday season? Even if you've already paid this year's balances off, there is nothing wrong with planning for next year. By purchasing gifts throughout the year, you can shop at your own pace and find items on sale. This tip also reduces stress, allowing you to avoid crowded malls during the already busy holiday season.

Consider increasing your exemptions. If you're receiving a substantial return each year you may want to think about increasing your exemptions on the W-4 form you file at work. The extra money you see in your paycheck could be automatically transferred into a savings account. When the government holds your money until the end of the year, you earn no interest.

Spend some and save some. For some people, the temptation of all that money is just too much and the need to buy something persists. This is understandable, but there can be a happy medium. Spend part of your return and save the rest. You will feel good enjoying your new purchase and seeing your monthly savings account statements growing throughout the year.

Article from lovemycreditunion.org