Tax Time - What to do With Your Refund

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Tax season is upon us and I know a lot of us are making big plans for our refunds. I'm one of those people who file as soon as possible and therefore have already received my refund, which I promptly applied as a payment on my credit card. I thought I'd share with you some frugal tips on what you could do with your tax refund.

First of all, if you're getting a huge refund, it might be time to revisit and adjust your withholding. Letting the government hold onto your money all year isn't doing you any favors. Getting that money on your paycheck now means you can be earning interest on it all year.

* Pay off debts. I know it doesn't sound as much fun as a shopping spree but apply your refund to your highest interest credit card or loan. This could save you hundreds or even thousands of dollars in interest during the life of your loan. Here is an example: We had a customer at work who was only making the minimum payment on their card. It would've taken them 24 years to pay it off and they would've paid thousands and thousands in interest. Ridiculous.

* Create an emergency fund. The economy is unstable and as much as I hope none of you ever get laid off, you might. It's important to have an emergency fund that is worth at least 3-6 months of your monthly expenses.

* Invest in your future. Open a retirement savings plan, an IRA, or contribute to your 401k at work. Doing this may even help you to retire early and will definitely help you to fund your later years of life.

* If you feel like you have to spend your money, consider spending it on an experience rather than whittling it away little by little on crap you don't need and won't remember buying. Take a trip, do something nice for those in need, go see a play.