10 Ways to Use Your Tax Refund in 2009

Last year I presented a list of five good ways and five bad ways to spend a tax refund. This year, I doubt most people will be taking their refund checks to Giant Appliance Mart and toting home a big-screen, but here are ten more tips for putting this year’s refund to good use.

Catch Up on Your Mortgage
If you fell a month late because of financial crunch, but can afford your monthly payments otherwise, then use your refund to catch up with the bank. Yes, there may be late fees and penalties, but it’s a lot better than going into foreclosure.

Stash Your Tax Refund in Your Emergency Fund
If your job is even slightly at risk, it’s better to deposit your refund into your emergency fund than to use it to pay down debt. Reduced debt is great, but it won’t put food on your table if you don’t have a paycheck. Your emergency fund will.

Pay Down Credit Card Debt
If your job is pretty secure (or you have two incomes and at least one of them is secure), then your next best option is paying down debt. That will allow you to put more of your monthly income into savings.

Pay Off a Student Loan
While most loans are consolidated into bigger loans, some private loans can’t be consolidated. If you have some of these small nuisance loans, use your refund to pay them off, or at least make a solid dent. Large payments go to principal, which reduces the amount due on future payments. If you continue to pay at your budgeted level, your balance will gallop down without a lot of effort. We have one nuisance loan left and the latest statement said our next payment is due in 2014 because of this strategy. Needless to say, we’re still paying it on schedule.

Make a Charitable Donation
Not the whole thing, unless you’re really flush with cash, but use the money to buy some extra canned or dry goods and donate them to a food pantry. Use coupons to make your donation money stretch further, or stock up at the 99-cent store (their canned goods aren’t bad, really.)

Put It in Your Car Fund
If you’re planning to buy a new car in the near future, put the refund in a separate car fund. Then it will be available as a sizable down payment. If you save enough, you may be able to pay cash for your new car.

Fix Up Your House
In this market, you probably won’t be selling your house anytime soon, unless you don’t mind competing with rock-bottom foreclosure prices. Instead, make your house more comfortable to live in. Fix the leaking roof. Install a skylight. Replace the energy-guzzling refrigerator. Repaint the walls. Get the carpets cleaned. Do the small and mid-sized things that are relatively affordable and greatly add to the enjoyment of your current home.

Plant a Food Garden
If you have a yard, you should consider planting some food plants, like tomatoes, citrus trees, herbs, and other garden-friendly edibles. The up-front cost is on the high side, which makes it a smart choice for a refund, but the upkeep costs are lower and will eventually save you money on food.

Go Out to Dinner
If you’ve been eating at home since the recession started, it’s time to go out to dinner. You don’t have to spend the entire refund, but you should treat yourself now and then. Not only will you support a local restaurant, but it will make you feel like you can still enjoy life.

Stock the Freezer and the Pantry
If you like beef, and have a large freezer, consider buying a quarter or half of a cow from a local farmer who raises pastured cows. You should be able to specify the sizes of your cuts and the meat will be properly sealed and frozen for long-term storage. Then you can have grassfed beef anytime you want for a fraction of the store price.

If you have enough storage space, you can also watch for sales on dry goods like beans, canned food you eat frequently, and pasta. Then stock up so you have them on hand when you need them and buy them at the best price.

Tax refunds are great tools if you use them properly. Of course, my preference is to withhold properly and not get one, but some people prefer them to receiving the money in small bits that will just be added to the budget. If you’re one of them, plan carefully so you can spend it wisely.

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