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Tips For Making The Most Of Your Tax Refund

With tax day behind us, many consumers now find themselves counting down the days until the tax refund arrives in the mail, or is transferred into one’s account.

According to Kiplinger.com, about 70 percent of all filers get tax refunds and are anticipating a tax refund averaging $2,200. Americans more than ever are choosing to efile and with more consumers filing their income taxes before April, the extra cash can’t come soon enough.
The NFCC suggests the following tips for managing your tax refund:

 

  • Avoid refund anticipation loans (RAL). An RAL is an extremely high-cost bank loan secured by your pending tax refund. If you’re looking for a quick refund you can get it within two weeks or less by efiling and having the refund directly deposited into your account.

 

  • Pay down credit cards or other high interest loans. Use your refund to pay more than the monthly minimum payments. Add extra cash to loans with high interest rates. If you can’t pay them off completely, make an extra payment. By making an extra credit card payment you can reduce your interest costs.

 

  • Pay down your mortgage. Any extra payments go toward paying down your principal. Using your refund to reduce your mortgage debt can mean substantial long-term savings. Just by making two extra payments a year, you might be able to pay off your loan in 15 years on a 30-year mortgage.

 

  • Contribute to or open an emergency fund. Most people don’t have money stashed away for unexpected emergencies. Your tax refund is a great way to start. The NFCC recommends saving three to six months of living expenses.

 

  • Invest in retirement. Many people are working after the normal retirement age of 65 and it is estimated that a majority of workers believe they are behind on their retirement.
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