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Consider better ways to use your tax refund

What are you going to do with your federal income tax refund this year? Instead of spending the money on things you don’t really need – like a bigger flat screen TV or the latest smart phone – you might put a sizeable refund to better use. Here are a few suggestions.

  1. Pay down debt. Improve your overall financial situation by reducing the amount of any outstanding debts beginning with high-interest rate credit card balances.
  2. Contribute to an IRA. For 2012, you can contribute up to $5,000 ($6,000 if you’re age 50 or over) to any combination of traditional and Roth IRAs. Contributions to a traditional IRA may be wholly or partially tax-deductible, while Roth IRAs can provide tax-free payouts in the future.
  3. Save for your children’s education. Investigate the options, such as tax-favored Section 529 plans.
  4. Build an emergency fund. Set aside some money that will be available in case of emergencies.
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