Source: Informa Research Services
(01-27-2010)
According to IRS spokesperson Nancy Mathis, this year’s average tax refunds are expected to be higher than last year’s average of $2,800 due to the addition of tax breaks available for home buyers, homeowners, car buyers, students, and those who are out of work. Use your tax refund wisely to improve your financial situation.
Make an extra payment on existing loans
If your refund is large enough, make an extra payment on an existing loan, such as your auto loan. Be sure to ask your financial institution if you can make a principal-only payment to lower the interest paid over the life of the loan. For a larger loan, such as a mortgage, one additional payment may not make a noticeable difference. A more effective solution may be refinancing your loan at a lower rate. Check online rate comparison tables to find the lowest refinance rate available in your area.
Use your refund to pay off high interest debt.
Instead of spending your refund frivolously, use it to pay down high interest debt, such as credit card debt. By doing this, you can potentially save yourself hundreds of dollars in interest charges. Additionally, you can lower this cost by using a low-interest credit card.
Sustain your savings
Most people do not save as much as they should, and a sizable tax fund may be the perfect lump sum to reinvigorate your savings. Look online to find the highest yielding savings account. Because rates are low, it would not be smart to lock into a long term certificate of deposit. Instead, look for short term CDs and money market accounts offering high rates are good deals.
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