Should You Spend or Save?

Put your tax refund money to work for you. According to the IRS, about three-quarters of Americans will average tax refund of $3,000. Since a refund can feel like "free" money, you may be tempted to splurge on a big-ticket item such as a wide-screen TV or exotic vacation. While it may be OK to have some fun with your refund, consider putting that money to work for your future:

• Pay down high interest debt. For example, if your credit card annual percentage interest rate (APR) is 12% and your balance is $3,000, you can save $360 in interest by not carrying that balance over the next 12 months.  
• Increase your emergency savings so you won’t have to rely upon high-interest credit cards to pay for the unexpected.  
• If you’ve got a young family or other dependents, buy life insurance. Depending on your age, you may be able to get a $500,000 policy for a few hundred dollars a year.  
• Invest in retirement savings. At a 5% return, your $3,000 investment will double in 14 years.
• Mortgage interest rates are at historic lows. Use the refund to offset the closing costs of a refinance that can reduce your monthly payment and save you thousands in interest over the life of the loan.
• Perform needed car or home maintenance. According to the U.S. Department of Energy, fixing a serious maintenance problem on your car can improve your gas mileage by as much as 40 percent. Likewise, the U.S. Environmental Protection Agency states that energy efficient windows can save the typical homeowner up to %500 per year in energy costs.
• Take continuing education classes that can boost your income and job prospects.
• Finally, don’t whittle away the money on meaningless purchases. Have a plan instead. 　

*Information provided by Mortgage Connection Newsletter, Spring 2012*