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article imageMake the most of your tax refund

By Gene Kosowan     Apr 22, 2014 in Business
If you're among the lucky folks getting money back from the feds, here are a few ways to ensure you get the biggest bang out of those bucks.
Take advantage of available plans
"If you just received a tax refund, you can park that in savings or a retirement account pronto," says Selena Maranjian of The Motley Fool, "before you can spend it." Available options in the U.S. include IRA or 410(k) accounts for retirement purposes, a worthwhile endeavor, especially if your employer matches what you put into them. Also consider state tax advantages as well as your child's education by putting some of that return into a Qualified Tuition Program. Canadian equivalents include Registered Retirement Savings Plans and Registered Education Savings Plans as well as a recent tax-saving initiative called the Tax-Free Savings Account, where you can shelter up to $5,000 annually from the government.
Pay down debt
"Attack those high-interest debts first," advises Gail Johnson in Yahoo! Canada Finance. With credit card interest as high as 21 per cent, curtailing the financial bleeding from a gush to a trickle, not only empowers your ability to budget it will also give you peace of mind. Others advise that if you have multiple credit cards debts, take the path of least resistance and pay off the one with the lowest rate first, before working on the others. Whichever way you choose, eliminating much of that debt right away frees extra cash for something else you really want or need in the long run.
Save for a rainy day
"As protection against a job loss, medical emergency or other financial crisis, try to set aside enough cash to cover six to nine months of living expenses," says VISA education program director Jason Alderman. Creating an emergency fund out of part of your return and then setting up an automatic monthly deposit from a percentage of your paycheque into that rainy day account should help you get through those bust periods.
Upgrade Your Home
"Consider applying your tax refund toward home improvements you've been putting off, like that kitchen remodel or bathroom upgrade," says Lisa Greene-Lewis in Huffington Post. You'll not only have more comfortable and better-looking digs, and a higher resale price on the home once you decide to relocate in the future.
Consider career investment
"Getting a big promotion or shifting to a higher-paying career often requires developing new skills," says Erin Peterson at Bankrate. Use part of that refund to take a distance learning course, or education opportunities offered by continuing education centres. You'll be better equipped and positioned for a promotion, career change or even an enjoyable revenue stream occupation if you decide to retire from the rat race.
More about Income, Tax, Refund
 
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