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  • 5 ways to responsibly utilize your tax refund

    You receive your tax refund in the mail and the first thing that crosses your mind is: “What can I spend this on?”

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    It may feel like your refund is free money, or simply an add-on to your current funds. But the truth is, you worked hard for your tax refund. The amount in that check is your own hard earned cash, it has just been untouchable until the government returned the borrowed funds. So, going out and spending that money on the latest gadget or gizmo is actually a hit to your personal income. Invest in your tax refund by prioritizing where that money will work the hardest for you.

    1. Pay off debts. The top priority, when deciding where that tax refund should go, is to pay off current debts. Whether you have credit card bills to pay, loans to payoff, or even money that you owe your parents, paying off those debts is a first priority. It may not be the most glamorous way to spend your refund, but it'll put you financially ahead of the game.

    2. Project goals. Investing your money towards long-term financial goals is another productive way to utilize your refund. Saving up for a down payment on a house, storing cash away for your needed car, or putting it towards your home's equity are all useful ways to spend your refund. Though it may not feel like you're making an investment for the future, minimizing the payments you would have made towards those inevitable projects will help you in the long run.

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    3. Retirement. It is always beneficial to place what money you can into your retirement savings, especially if you're behind on installments that should have been going towards your 401(k). Again, it's not the most glamorous way to use your refund; however, in the scheme of your long-term finances you'll be glad that you saved for retirement as frequently as you did. The earlier you save for retirement, the better off you'll be.

    4. Build on emergency savings. Stocking away your refund money into savings is a great option for your tax refund. You never know when an emergency situation will pop up, this could be new tires or even an appliance. Plus, by adding to your savings, you'll have the ability to spend a fraction of it on that wanted item, while also allowing you to store the rest of it away for any later needs.

    5. Pay it forward. Treat your refund as you would any paycheck and use it to cover the expected expenses for the upcoming month, such as rent, bills, or gas. Your tax refund tends to tease the possibility of all the things that you could buy. Remember to stay practical when you get your tax refund this year, and be sure to put it towards something that will make your money work harder for you.

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