10 Smart Ways to Spend Your Tax Refund

Are you among those pondering what to do with that hard earned tax refund check? Put it to use where it will do you the most good. Here are 10 suggestions from experts for smart ways to spend the windfall:

1. Emergency Savings:
Establish an emergency savings fund. Minimum $500 in the bank. Go a step further…shoot for $1,000. Experts suggest 3-6 months' living expenses, but everything helps. Keep the money in an interest-bearing savings account. Now you’ll have it for irregular bills like insurance, car registration, new tires, dental emergencies, etc.

2. Lower Your Credit Card Balances:
Pay down the balance on credit cards, starting with the debt with the highest interest rate. Your tax refund is like free money that can go toward paying off very expensive interest and debt.

3. Improve Your Credit:
Consult with a credit expert (www.moneymanagement.org, www.takechargeamerica.org or www.arizonahcc.org) who provides credit counseling to help you improve your credit score by paying down debt, paying off collections or judgments, etc. A higher credit score means big savings in interest on future financing & insurance premiums.

4. Get Ahead:
Pay for monthly recurring expenses, such as child care, utilities, prescriptions, insurance premiums, student loan payments or rent. Don't be in the position of having to use a credit card to pay for summer air conditioning bills.

5. Stock Up:
Purchase several months' worth of supplies you use frequently, such as household cleaning products, paper products, frozen food, pet food or diapers.

6. Pay Medical Costs:
Pay down medical debt, or pay for much-needed, delayed medical procedures.

7. Car Repair:
Spend to keep your car in tiptop shape. (The cheapest car to drive is the one you already own, when you’re keeping up on oil changes and doing regular maintenance.)

8. Retire:
Remember the journey to your golden years starts with the first $100. (A) If you’ve been afraid to enroll in your workplace 401(k) plan because of the hit on your take-home pay, use your rebate to ease the transition. (B) Throw $300 into a savings account paying 4%, add that much every year until you retire, and if you’re in your 20’s now, you’ll wind up with about $30,000. Enough to retire on, no but a lot better than retiring with nothing.

9. Build Home Equity:
If you’re a homeowner, add the rebate to your next mortgage payment, which will build up equity in your home and reduce the amount of interest you pay over the life of the loan. HOME MAINTENANCE: Repair nagging house problems that will only get worse, such as plumbing leaks or termite infestation.

10. College Fund:
Begin, or add it to a child's college fund or one for yourself.

Note: Financial priorities are unique to each individual’s personal financial situation and do not necessarily follow the order as listed above. Attend one of Arizona Saves’ workshops to learn how to prioritize your financial goals.

Useful savings tools can be found on the Arizona Saves website (www.arizonasaves.org) or at the national America Saves Week website (www.americasavesweek.org). These tools include a "savings checklist" and information on how to pay off high-cost debt, reduce spending and build savings for an emergency.