What to do with your Tax Return

The W2′s have been printed! Most returns are on their way if not received already. Rather than blow your refund on a shopping spree or trip to D.R. here are some ideas that will benefit you throughout the year.

Open a Savings Account or Other Long Term investment

Your local credit union more than likely offers a better interest rate than a popular bank such as TD. Open a savings account and put in a percentage of your return. Then LEAVE IT until the following year (at least). Depending on how much you put in, you may be surprised at the amount of interest earned. This money can also be used as a rainy day fund.

Pay off a bill for the year

A great way to build credit is to set up an automatic payment for one of your bills. Call the companies that you pay each month and inquire about whether they offer bank accounts. Often there’s a benefit to setting up an auto-pay account with the company you owe.

For example, my auto loan is automatically pulled from an account with the same company that financed my car. Each year I put the amount needed to pay the bill for the next 12 months. In return the company gives me a lower interest rate for my car payment. They also report to the credit bureau that I pay my bill on time each month- which increases my credit score.

Online accounts are a little harder to access (which can be a great thing!) but they often come with great perks such as ATM reimbursements.

Pay off Debt

I personally hate to owe money. Usually the more money you owe, the more you are charged. Before spending a lump sum of money on clothes or shoes, pay back money owed – It will save you money in the future.

For example if you carry $1100.00 on a credit card that charges you 25.40% interest each. Your amount due may only be $25.00 a month but you are also adding $23.00 to your debt each month. By the end of the year you have given your credit card company $276.00 of your hard earned money.

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