Five Smart Ways To Use Your Tax Refund

April 15th is fast approaching, and that means the dreaded task of paying taxes. For most of us, though, Uncle Sam has been skimming off the top of our paycheck all year, and it’s time for him to give us what we deserve: Our Tax Refund!

It’s very tempting to blow your refund on something fun like a vacation or the down-payment on the new car you’ve had your eye on. Before you go off doing something unwise with your money, check out these other ideas for what to do with your tax refund.

This year, make sure that check you get in the mail doesn*t go to waste. No matter how large or small your refund is, here are 5 ways to make sure every cent of your tax refund goes as far as possible:

1. Earn Interest in an Online Bank Account

You*d be surprised how much interest you can earn when you have your money in an account with a high Annual Percentage Yield. Several online banks are offering high interest rates to attract customers. Average savings accounts will usually earn you about 0.5% interest. The Orange Account by ING Direct ( http://www.OrangeAccount.com ), earns you 2.60% on every dollar in your account. The best part is that there are no fees, no minimum deposits to start, and opening an account is as easy as linking it to your current checking account.

If you put your refund check in this type of account, and keep at it, you can earn a lot of interest over the next year. Think of what that could buy!

2. Pay off Your Mortgage

If you haven*t looked at your mortgage statement recently, you probably should. If you*re anywhere near the first 5-10 years of your loan, chances are good that more than 75% of your monthly mortgage payment goes towards interest. You are essentially throwing every cent of that money away. On the other hand, 100% of any payments you make above and beyond the required payment goes straight to your principle, and can cut years off your mortgage. Paying an extra $2000 now can save you more than $10,000 in the long run.

Every $1000 extra dollars you put towards your mortgage payment this month can save you as much as $50-$100/month starting right now. Think of what you could do with that kind of money.

3. Open an IRA

If you don*t already have an IRA, you need to open one. If not, you are missing out on earning tax-free interest from now until you retire. Recently, restrictions on IRAs have been lessened, making it even easier to open an IRA. Almost any bank, or investment institution can open one for you for free, and you can apply any payments made before April 15th to the previous year, giving you a whole year*s head start. All contributions to a regular IRA are 100% tax-deductible, and nearly everyone qualifies to open one. To find out more about the different types of IRAs, and how to get started, go to: http://www.kaspercpa.com/rothira.htm

Keep in mind that you won’t be able to withdraw the money until you retire without incurring large penalties. IRAs are a fantastic way to save for retirement, but don’t put money into it that you might need later.

4. Pay off all of your credit cards

The worst type of debt you can possibly have is credit card debt, so if you carry a balance on any credit cards, please take this advice: Pay It Off Now!

Paying the minimum balance on your credit cards every month can cause all purchases made on the cards to end up costing five times as much as the original price. And unlike a home loan or car loan, you aren*t building any equity at all by using a credit card. Of all the different types of debt you have, credit card debt is by far the most important to pay off immediately. Take your refund. Pay off every credit card. You won*t regret it.

5. Invest in Stocks or Mutual Funds

Despite it*s ups and downs, investing in the Stock Market has proven to be one of the most reliable and profitable investments a person can make. In the long term, the market always rises. Over the past 50 years, even a person that invested all of their money right before every market crash, would come out significantly ahead of where he started. The internet has made investing easier than ever. You can open an account in minutes, transfer money from your checking account in a matter of hours, and get trade confirmations in just seconds. If the fast-paced world of buying and selling securities isn*t for you, you can put your money in a mutual fund, which have proven to be great long- term investments. You can do all of these things with Ameritrade ( http://www.ameritrade.com ), one of the largest and easiest-to- use online brokerage firms.

It*s always tempting to splurge on something with your tax refund, but the best way to reward yourself is to prevent hassles down the road by being smart with your money today. Follow these tips, and you*ll be on your way to a prosperous future!

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