What to do with your tax refund?

Taxes chart with green pinNow that tax season is winding down, hopefully you have taken advantage of the many tax deductions available and the IRS has allowed you to walk away with a couple of dollars in your pocket.  According to the Internal Revenue Service (IRS), the average tax refund is approximately $3,000.   Knowing this – many corporations aim advertisements to snatch your tax refund out of your pocket.  Whether it’s a tax day sale or car dealers promising to double your tax refund, there are many sticky financial traps – so be cautious as you decide what to do with your tax refund.
Generate an instant return
The American Bankers Association estimates a family carries approximately $10,000 in credit card debt.  If you are carrying high interest debt, there is no better move than to pay off your credit cards first!  This would in turn immediately save you money and generate instant returns for you.  Say for instance, if you have a credit card balance of $3,000 and incurring high finance charges, paying down this debt would actually save you a lot of money over time versus simply paying the minimum monthly payment.

Increase your net worth

Getting extra money is great, but increasing your net worth is better! Your net worth is simply your assets minus your liabilities, which will provide you with your current net worth. Be strategic in what you do with the money you received. Use the money to not only pay down debt, but build an emergency fund, save for retirement or put away money for your children’s college tuition. If you struggle with reaching your goals on your own, consider meeting with a financial professional to hatch out your financial goals. But do your homework first! Take time to research to make sure he or she is a great fit for you.  Also, question your planner about fees, specialized services and his/her credentials before committing to services.

If you are a do it yourself type of person, consider visiting websites, such as American Bankers Association or My Money.gov to help you navigate through your financial situation,

Whichever fits your boat, strategizing how you will use your tax refund this tax season will only help you reach your financial plans sooner!

Remember: your choice, your future!

Kemberley Washington is a certified public accountant and a business professor at Dillard University. Follow her on Twitter or Facebook. Subscribe to her blog at kemberley.com.

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