Last year, the average tax refund was just over $3,000. Although it might be tempting to dash out and buy a brand new, shiny something or other, curb that impulse for a minute and ponder your options.


 


It’s okay to give yourself a little treat, say personal financial planning experts at the Oklahoma Society of Certified Public Accountants, but remember, the IRS isn’t sending you that money just for fun. That’s your

hard-earned money, so consider using it in ways that can potentially help you out down the road.


Last year, the average tax refund was just over $3,000. Although it might be tempting to dash out and buy a brand new, shiny something or other, curb that impulse for a minute and ponder your options.

 

It’s okay to give yourself a little treat, say personal financial planning experts at the Oklahoma Society of Certified Public Accountants, but remember, the IRS isn’t sending you that money just for fun. That’s your
hard-earned money, so consider using it in ways that can potentially help you out down the road.

 

Here’s some suggestions from the OSCPA:

 

1. Pay down debt ‹ consider using all or part of the refund to pay down balances on high-interest credit card debt, medical debt or car loans. Reducing high-interest debt whenever you can is always a good idea.

 

2. Invest in your future. Studies show 68 percent of Americans aren’t saving enough for their retirement. Use the refund to put more money into an Individual Retirement Account, 401(k) or a mutual fund. Other considerations might be a savings account or certificates of deposit with the best rates available.

 

3. Invest in your children’s future. If your retirement fund is looking strong, consider investing a little extra in your college savings plans.

 

4. Create an emergency fund. If you don’t have the extra money in your hand, it’s time to take action. Experts recommend having at least six months’ worth of living expenses on hand for unforeseen circumstances. Get your fund started with your refund and then add money each month to tide you over in
difficult times.

 

5. Make an extra mortgage payment. If your goal is to pay down your mortgage, just one extra payment towards the principal amount could reduce the interest paid over the life of your mortgage by thousands of dollars.

 

6. Refinance ‹ mortgage rates remain low, check to see if  refinancing would be a benefit. You could save thousands over the life of your mortgage and your tax refund can help foot the bill if there are fees involved.

 

7. Do what you’ve been putting off. Things like a non-life threatening medical procedures, dental work, braces for the kids or tires for the car may have all seemed like luxury items when you didn’t have ready cash. Now you do. Use it wisely.

 

A CPA can help. If you are continually receiving a large refund year after year, it’s probably time to take a look at your withholdings on your W-4 statement - the form you completed for your employer when you were hired so they withhold the correct amount of federal income tax from your pay. If your
financial situation has changed, you need to change your withholdings.

 

“The most important thing is to stop overpaying the government with your money,” said Marilyn Geiger, CPA, chair of the OSCPA Financial Literacy Committee. “Ideally, at the end of the year, you don’t owe the government anything, and the government doesn’t owe you anything. If you do receive a refund, give careful thought to how you use it. Allow yourself a small reward now, and then use the rest in such a way that you’ll receive a much larger reward in the future.”

 

For more advice on planning for your financial future, visit www.KnowWhatCounts.org, where you can locate a personal financial adviser with Find-A-CPA, ask a panel of CPAs a financial question using Ask-A-CPA, subscribe to the free e-newsletter, Know What Counts, or find a library near you that’s distributing the 2012 free Financial Fitness Kit.