The Reward of Saving your Tax Refund

Millions of people will be receiving an income tax refund check from the federal government this year because of an overpayment of their taxes throughout the year. Once these people get these checks into their hot little hands, they imagine all sorts of things to spend this new “free” money on. This year, many people are planning on doing something much smarter with their income tax refund check; they are planning on making their money work for them.

Pay Off Existing Debts

For many people, the best thing that they can do with their income tax refund check is to use the money to pay off or pay down some of their existing debts. Although it may be tempting to use the money to purchase tickets for an exotic vacation, using the money to pay off existing debts is a much smarter money move because of the amount of money that paying off the debts can save you in the long run. It is estimated that the average adult in the United States has at least $5,000 in existing debt today.

By using the money to pay off or pay down an existing debt, the person will be eliminating future interest charges associated with carrying a balance on the account. Paying off the account will also eliminate the risk of late payment charges, over-limit charges, finance charges, or a higher interest rate being levied against the account in the future. By paying off the account when you have the chance, you will be increasing your financial freedom for the future as well as freeing up the portion of your funds that was going towards paying the account each month.

Make A Major (Needed) Purchase

If you have been putting off getting a new hot water heater for your home or your refrigerator is on the fritz, then there is no better time to pay for the needed purchase than when you have the money in hand from your income tax refund check. In many cases, paying for these items could cost hundreds, if not thousands, of dollars out of pocket, an amount of money that may be hard to come by all at once at other times of the year. Making these major purchases using the money from your income tax refund check means that you will be avoiding paying interest on the purchase, as you would if you were to place the purchase on a credit card or apply for financing through the company.

Place The Money Into Savings

If you are fortunate enough to not have a great deal of outstanding debt and there are no pressing purchases that need to be made for the good of the family, then the best place to put the money from your income tax refund check is in a savings account. By placing the money into a savings account, you reduce the temptation to spend the money on frivolous things and hold the money in reserve for future needs. In many cases, the person can have the money from their income tax refund directly deposited into the savings account by the IRS to make sure that every penny goes into the account.