Along with posts about wills, it seems like I've been running into (and writing about), articles that suggest how you should spend your tax refund. So we might as well let USA Today weigh in on the subject. They start by telling us how the average refund is $2,379 this year, how bad it is to get a refund in the first place and what we should do to make sure we don't get a huge refund every year. Then they suggest the following ways to use a refund if you do get one:
If you have loads of debt, paying it off is your best move.
But let's say you're debt-free and are getting an average-sized tax refund each year. Why not start an individual retirement account?
Don't wait until you get your check. It can be tough to save when you have a check in your pocket whispering, "iPod." Instead, consider adjusting your W-4 form so you're not overwithholding in the first place. The W-4 tells your employer how much to take from your paycheck for taxes. Be careful, though, not to underwithhold. No one likes paying the IRS at tax time.
Your next step: Start an automatic investment plan at a mutual fund company, using your tax savings to fund it. Many fund companies will let you start with as little as $50, provided you let the company tap your bank account electronically every month. T. Rowe Price, for example, will let you start an automatic investment plan in most of its funds for just $50.
Similar advice to what I've previously shared, but it never hurts to go over the basics. Who knows, someone may actually listen and follow this advice. ;-)
For a bit more detail, see Getting a Tax Refund is Costing Americans Billions.
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