It’s hard to believe that Tax Day was just a couple of weeks ago, and now many of you are waiting for your state and federal tax refunds to arrive. According to the IRS, the average tax refund for 2013 is approximately $2,800. As tempting as it would be to spend it all on a vacation or go on a shopping spree, here are some other ideas on how to make the most of your tax refund this year:
Pay off Your Credit Card: Take advantage of extra cash to pay down any outstanding balances you may have. Financial advisors suggest you pay off the card with the highest interest rate first and then work your way through the other cards until they are paid off.
Build Your Emergency Savings: In these unpredictable times, it never hurts to have some money saved for a rainy day. Experts recommend having 3-6 months of living expenses in an interest-bearing savings account just in case. Check out this article from Kiplinger’s on why we need an emergency fund.
Spend on Something You Need: Been holding out and avoiding expensive things like getting your car repaired or buying something new for your apartment? Now that you have some extra cash, go ahead and take care of some of the “necessities” that have been put on hold over the past few months.
Give to a Charity: If you’ve been aching to support a favorite cause or organization, this is a great time to do so. Not only does it feel good to donate to something you care about, but you can also claim a tax deduction next year.
Save for Retirement: Retirement may seem like a million years away, but any money you can put away while you are young will grow substantially because of compound interest. If you’re not already contributing to your retirement account, consider starting or making a contribution to your 401(k) or SEP IRA plan if you already have one set up.
Splurge on Yourself: Have all of the above covered? Maybe that means it’s time to treat yourself to something special. New clothes or that smartphone you’ve been dying to upgrade to, or even money towards a big vacation in the future.
If having a little extra moula has whet your appetite to save even more, read this article from Practical Money Skills.by Variny Paladino