Ideas for spending your tax refund responsibly

Ideas for spending your tax refund responsibly

(WWBT) - Are you getting a tax refund this year? Is it already burning a hole in your pocket?

Fight the urge to blow it on a trip or shopping spree because there are other ways to spend it responsibly.

Your instinct is to look at your tax refund as a windfall, so you want to splurge on a vacation, new car or maybe granite countertops. But, if you remind yourself what a tax refund really is, it could reign you in.

Basically, a tax refund means you gave the government an interest-free loan, and the government just gave you your own money back.

So, here's what you could do with that extra cash.

First, put it in a savings account. According to a survey, 66 million Americans have nothing in their savings for an emergency. If your car breaks down or you get a surprise medical bill, that savings account could be a lifesaver. The money can also be contributed to a 401(k) or IRA for retirement.

Michael Joyce, president of JoycePayne Partners, a financial planning firm in Richmond, said he works with families across central Virginia and recommends paying down "bad debt."

"Credit card debt or even car loans, things like that," Joyce said. "Take that portion of your tax refund and pay it down. It may not be as much fun as a cruise, but it's going to be better for your financial well-being over time."

Another plan could be to put the money in your child's Virginia 529 plan to help them save for college.

Saving the money in a conventional savings account but earmarking it for a specific long-term goal is also a good plan.

All of these ideas will help you financially down the road.

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