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Use that needed refund wisely.

Tax season is nearly over, and millions of Americans will receive checks in the mail in the coming weeks from the Internal Revenue Service. Tax refunds can help you reach your financial goals and build a cushion against future expenses. The National Society of Accountants, Alexandria, Va., advises taxpayers to give some thought to how to use your extra cash to improve your financial situation before you spend it.

To put things in perspective, remember that a tax refund is not some sort of magical windfall--it is your money. Be shrewd with it and try one or more of these money-smart suggestions:

Start an emergency fund. This money could be used for living expenses for several months in the event of a major crisis, like job loss.

Pay down your debt. If you can knock out--or knock down--the balance of even one high-interest credit card, you are making money.

Max out your retirement accounts. Contribute to employee retirement accounts up to the employer match.

Fund your IRA. Did you know that you can have the Internal Revenue Service direct deposit your refund into your Roth, Traditional, or SEP-IRA? While it may be too late to do that this year, it never is a bad idea to write a check to your IRA custodian when your refund arrives.

Prepay your mortgage. Send your refund to your mortgage lender. You will realize savings over the life of your lean, and own your house outright sooner than expected.

Refinance your mortgage. While refinancing your mortgage to a lower rate can result in substantial savings, you typically need to bring some cash to the table.

Invest in your children. Use that money to lay the financial groundwork for your child's college education. Start a college fund for your kids; whether it is an Education Savings Account or a 539 plan, there is no better time than the present to get going.

Make your living space more energy efficient. Replace all of your light bulbs with energy efficient versions, put in programmable thermostats, air seal your home, get a blanket for your water heater (if it needs one), and so forth.

Spruce up the homestead. Home improvement projects can increase the value of your home, so consider rolling that money into new kitchen cabinets, a freshened-up bathroom, repainting some rooms, a new carpet, or landscaping to improve your curb appeal.

Adjust withholding. This way you do not end up giving the government an interest-free loan.

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Please note: Some tables or figures were omitted from this article.

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Title Annotation:tax refunds
Publication:USA Today (Magazine)
Geographic Code:1USA
Date:Apr 1, 2012
Words:421
Previous Article:What it costs to have your taxes done.
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