Five Ways to Make Your Refund Check Go Further

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So you’re about to get (hopefully) a tax refund check and you’re probably thinking, “What’s a couple thousand bucks gonna get me?”

And that’s if you get the typical tax refund.

The good news is that Joe (and Jane) the Plumber will get back on average $2,800, up $400 from $2,400 from last year. But when you see that 64 percent of your friends and family are losing jobs—and that’s the stat from a survey by Econ4U—you start to think, “Geez, can this even help me much?”

So let’s talk about how it can help you—how you can make the most of that check. Here are the top five ideas I’m telling friends, family, and members of our WeSeed community:

  • Pay down credit card debt: Chances are you’re paying double digit interest rates so maybe you’re among the 18 percent of Americans surveyed who said they plan to wipe out a little credit card debt with their check. That’s a good idea, especially since new laws protecting you from unexpected rate hikes won’t go into effect until next year and with the economy such a wreck, banks have been quick to hike rates.

“If you have high interest rate credit card debt,” says Jean Chatzky, Today Show contributor and author of The Difference: How Anyone Can Prosper in Even the Toughest Times, “you’ll get no better guaranteed return on your money (except possibly with 401(k) matching dollars) than you will by paying it down. The return on your money is equal to the interest rate on your debt.”

 So, pay off a chunk and you’ll not only get rid of some of the debt, you’ll avoid additional interest payments.

  • Save for retirement: I know … you’re nervous about the market but if you’ve been waiting for some money to open an IRA, here’s your chance. You can turn that $2,800 into over $20,000 just by putting it into a good mutual fund and letting it sit there for the next thirty years, even at just a 7–8 percent average annual return. If you’re nervous about the market, take the time to learn and select carefully and, in the meantime, park your money in an online savings account, which typically offers higher rates (HSBC Direct for instance, at 1.65 percent and no minimums). A better bet—if you have a 401(k)—would be to increase your contribution rate and use the tax refund to offset it. The maximum 2009 contributions are $5,000 for an IRA and $16,500 for 401(k)s (if 50 or older, $6,000 and $22,000 for each respectively).

  • Improve your job skills: “Right now, anything you can do to improve your marketable skills to help you keep the job you have or land the next one is a good move,” says Chatzky. So, take an adult course at a community college or a university’s online program taught by an expert. Imagine the difference in your future by taking a public speaking course, web design course, second language. Investing just $1,000 in a new course might yield you a $3,000 raise and put you on an even better professional footing. Plus, you might make some great contacts.

  • Shave housing costs: If you’ve wanted to refinance but didn’t have enough to cover the costs, here’s your chance. Rates are still hovering at thirty-year lows of about 5 percent. If you plan on staying in your home and want to pay it off, even an extra $500 toward the principal will save you thousands in interest over the years.

  • Expand the House: Everyone talks about remodeling your kitchen as offering the best bang for your remodel buck. True … if you’re just remodeling. The better bang is adding square footage. Remember, that’s one of the top ways anyone values a home. And today, you can make that refund check go further: I know from personal experience that contractors are looking for work big-time and they tell me supplies like tile are at 30 percent off.

So think hard about how you want to spend this money. How can you further yourself as the chief income provider for you and/or your family? Hopefully, I’ve given you some great ideas.

By the way, to check on your refund, you can go online to or call (800) 829–1954. Just be sure to have handy your Social Security number, filing status, exact refund amount. 

Updated April 15, 2010

Jennifer Openshaw of WeSeed


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