Making The Most Of Your Tax Refund

ROCKVILLE, MD. — Tax refunds can give an individual or family a significant financial boost, but all too often that refund is spent many times over before the check actually arrives in the mail. According to the Federal Reserve, consumer household debt was up ten percent in 2003, and experts say using some of your refund to reduce that debt is a good idea.

“To many people, getting a tax refund is like finding a $20 bill in your pocket. That kind of found money usually gets spent pretty fast,” said Pam Rhode, president of Myvesta, a nonprofit consumer education organization. “Before you start thinking of ways to spend that extra money, sit down and take stock of your current financial situation. Chances are you can use that money in other areas of your life.”

Ms Rhode recommends using the rule of thirds when managing a tax refund, inheritance, or other cash bonus outside of your normal income.

“When you get your refund check in the mail, take one-third of it and have some fun. Put another third toward any debts you have and put the last third in your savings,” Ms Rhode said. “While it may be tempting to spend every last dime of your refund at the mall, having some fun with the money and using a portion of it wisely can allow you to live a little and get a jump on your debt or savings.”

If you are not among the Americans receiving a tax refund this year and you are not able to meet your tax obligations, read the Myvesta publication How to Deal With the IRS if You Can’t Pay Your Taxes. For $5 it can be downloaded online from Myvesta.org, or for a printed copy send $5, payable to Myvesta, to IRS Publication, Myvesta, PO Box 7153, Gaithersburg MD, 20898-7153.