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Payback Time For Dear Uncle Sam
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For more information contact:
Kelly Rote (713) 394-3201 |
Release Date: April 12, 2006 |
For more than 100 million small-time lenders, it’s payback time! Uncle Sam is going to refund an average of more than $2,000 to Americans who over-withheld during 2005.
While your tax refund may look and feel like “free” money, it’s not. You worked hard to earn every penny of your income—including your tax refund. Before running to the nearest mall or entertainment venue, listen to the following ideas of how to spend refund money wisely, from the credit experts at Money Management International:
Pay down debt. If you are due a tax refund, you gave the government an interest-free loan. Yet, it is doubtful that your creditors provided these loan terms. In fact, the average fixed credit card interest rate is now 12.94 percent. Use your tax refund to pay down credit card debt.
Save for a rainy (or stormy) day. Put your refund into a savings account so that you will be able to afford any unplanned expenses. If there are any emergencies, the extra cash will keep the situation from becoming a financial disaster.
Be patient. It is probably not worth $30 to $300 to receive your refund several weeks early. If you must take out a refund anticipation loan, be sure to compare rates and to read the terms of the loan carefully. As an alternative, try to e-file. According to the IRS, taxpayers who file electronically get their refunds in about half the time as those who file paper returns.
Put your savings in interest paying accounts. You work hard for your money, now make your money work hard for you. Use your refund wisely by placing it in an interest-bearing savings account. Depositing $2,000 into a savings vehicle that earns 8 percent interest can really add up. After 5 years, it will be worth $2,939. After 10 years, it will be worth $4,318.
Invest in yourself or others. You are your most important and valuable asset. Use your rebate to further your education or enhance a skill.
Finally, if your tax refund exceeds $500, consider reducing the withholding on your W-4. “Remember, getting a tax refund means that you gave the government an interest-free loan,” said Cate Williams, vice president of financial literacy for Money Management International. “Just think, if your refund this year is $2,000, that means you could have increased your take-home pay by more than $165 a month without owing anything to the IRS on April 15.”
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Money Management International, is a non-profit community service organization that provides confidential financial guidance, counseling and debt management assistance to consumers. MMI helps consumers trim their expenses, develop a workable budget, lower their debt payments and repay debts. Services are available by phone. To visit with an MMI counselor, call toll-free 1-800-762-2271- 24 hours a day, 7 days a week. Spanish speaking counselors are available. Consumers can also learn more by visiting the MMI home page at www.moneymanagement.org.
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