If you receive a tax refund this year, it may be tempting to spend it on new electronics, a vacation or some other luxury item. Before rushing to the car dealership, furniture store or shopping center, take a moment to reflect on your financial situation. Consider the following ideas for making the most of your tax return.

• Use your tax return to catch up on bills. If you have outstanding or past-due bills that are accruing interest and late fees, put your return toward these first.
• Assess your overall debt and credit situation. How much money do you owe? If you have multiple accounts to choose from, choose the one with the highest interest rate to pay off first. Visit http://www.powerpay.org and experiment with the online calculators programmed to show you how to get out of debt. If you owe $3000 at 17% and are making a payment of $50 per month, you can expect to pay off your debt in 135 months. Additionally, you will pay more than $3750 in interest. If you dedicate $1000 from your tax refund to reduce the debt, you’ll pay it off in 60 months and will safe $2750 in interest. This is assuming that you stop charging on the account and do not add to the balance.
• Nearly six in 10 Americans don’t have enough savings to cover an unplanned expense of $500 or more. Deposit some of your refund into an emergency savings account. The IRS can deposit your refund directly into an account instead of issuing you a check. By filling out IRS Form 8888 you have the choice of directing your refund to one, two or three accounts such as checking, savings, and retirement accounts. If you intend to save at least $50 or more of your tax refund, consider participating in SaveYourRefund. SaveYourRefund is made possible by organizations across the country who are helping Americans take full advantage of this savings opportunity. See the rules at https://saveyourrefund.com/home/
• Use the refund to build a savings fund for non-monthly expenses that come throughout the year. Examples include Christmas, car registration, school registration or tuition, back-to-school clothes, birthdays, summer vacation, etc. Use a portion of the tax return to get this fund going, and imagine how prepared you will feel when you need the money and it is available.
• Look at retirement funds and pension plans. There are many online calculators to estimate future funds needed for retirement. Place your tax return in a Roth IRA or open a new investment fund. Watch as your money grows, adding a nice cushion to your retirement savings.
• As a family, make or review family financial goals. These could include a family vacation, providing college education funds or buying/paying off a home. What goal could use a boost from the tax return? Making it a family effort teaches family members valuable lessons about goal setting and saving money. After determining your financial situation, make decisions that will most benefit your own financial goals and security.

Sharon Treen, streen@ufl.edu Flagler County Extension Director, UF/IFAS Extension

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