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Janice France-Pettit:Use your tax refund wisely

Posted: April 30, 2014 2:00 a.m.
Updated: April 30, 2014 2:00 a.m.

If you are one of the millions of Americans receiving a refund this year, following are several ways to put your refund to work.

Shore up your emergency fund
Experts recommend that you set aside at least three months worth of expenses in savings in case of an emergency or job loss. Consider getting a jump on starting or bolstering those savings with your tax return.

Pay down debt
Eliminating debt is one of the fastest ways to free up money for savings and investments. Credit card bills, student loans and other debt can be a burden on a budget, and the balances accumulate interest, adding to your debt. Use your tax return to pay off high-interest debt to help free your budget for other financial goals.

Take a class
Put your refund toward paying for continuing education classes, online courses or enrolling in a community college program to help you sharpen skills, learn a new language or enhance general knowledge. Furthering your education may also help your career and increase your earning power.

Add to your retirement account
According to a 2014 survey by the Employee Benefit Research Institute, only 57 percent of Early Baby Boomers, 59 percent of Late Boomers and fewer than 58 percent of Gen Xers are projected to have enough money saved for retirement.
Consider investing your refund in a traditional IRA or another tax-deferred account, like a 401(k) and explore any tax benefits with a trusted financial advisor. Or contribute to a 529 college savings account, and when you are ready to enroll, you’ll be able to use the money tax-free for college bills, and perhaps get a state income-tax deduction for your contribution.

Conquer home improvement projects
Look into improvement projects that add value to your home or lower your energy consumption. Investing in dual-pane windows or energy efficient appliances may not only help save you money on your energy bill, but you may also receive a tax benefit.
Start by contacting your utility company to see if they offer free energy audits or can recommend energy saving projects, or visit to learn about incentives for energy-saving items to make your refund go further.

Make an extra mortgage payment
Put the money toward the principal on your mortgage by making one extra mortgage payment every year, you can reduce the amount of interest you pay over the term of the loan, build equity faster, and will be able to pay your mortgage off sooner. If you plan on buying a home, then add your tax return to the money you have saved for a down payment.

Making a tax deductible donation to an organization or cause that you are passionate about is another way to utilize your tax refund and may provide year-end tax benefits as well.
While many Americans often view tax refunds as windfalls, it is important to remember that this is your hard-earned money and it might be time to adjust your income tax withholdings.
Doing so could increase your take-home pay, which can be put to better use than being an interest-free loan to the government.
You can change your withholding any time during the year, and the IRS provides a calculator tool on its Web site ( to help determine how much you should be withholding.

Co-authored by Janice France-Pettit and Tina Robinson. France-Pettitis a senior vice president and regional manager for Union Bank. The column is intended to provide general information about using your tax refund and is not considered financial or tax advice from Union Bank.



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