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Ways to Use Your Income Tax Refund Wisely

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    Many people who are expecting an income tax refund already have a plan on how they want to spend it. Here are some options you can use to make the most of your refund.

    Pay some bills or debts

    Your tax return can be a good way to get caught up on bills. It can also help you get ahead and save money in the long run. If you have debt that gets charged interest, such as a credit card account, paying more than the minimum payment can save you a lot because you won’t pay as much interest in the end. It might help improve your credit score, too.

    Save some money

    Having some money saved can pay off. For one thing, it earns interest. For another, and possibly more important, it can help out in an emergency. If you put $400.00 in a savings account now and your car breaks down in four months, you have money set aside to fix it. That is money you don’t have to take away from your rent or mortgage, or groceries. That is money you don’t have to put on a credit card and pay lots of interest on. And until you need it, it is just sitting in the bank or credit union making a little interest.

    If you decide to put it in a checking account, don’t carry the debit card around with you. That way you won’t be tempted to use it for things that are not really emergencies.

    Save a little, pay a little

    It can seem like you get farther ahead by paying off a high interest debt than saving for a rainy day. But most experts suggest putting some money toward your debt and some into a savings account. That way if you have an emergency you don’t have to rely on credit cards that might be maxed out or have high interest rates.

    It can be hard to save money that is easily available. Putting it in a separate account may make it easier. It can be a savings account, but it doesn’t have to be. Talk to your bank or credit union about the account options that are available. You might be better off with a checking account that has rewards instead of a savings account that has a low interest rate. Check to see what fees might apply to the account and whether it has any minimum balances before you open it.

    Save a little, Win big?

    The Save Your Refund Sweepstakes

    Until April 15, you can sign up for the “Save Your Refund” sweepstakes if you:

    • Are 18 years of age or older
    • Expect a federal income tax refund and
    • Save part of that refund.

    The “Save Your Refund” sweepstakes is sponsored by a non-profit called Doorways to Dreams (D2D) Fund, Inc., which is supported by the Annie E. Casey Foundation, Capital One and another philanthropic source.

    If you’re eligible you can sign up at www.saveyourrefund.com. You are eligible if you save part of your refund by using IRS Form 8888 (Allocation of Refund form) to put $50.00 or more of your 2015 federal income tax refund into two or more accounts. At least one of the accounts must be a qualified account.

    A qualified account is:

    • A U.S. Savings Bond
    • A Savings Account
    • A Certificate of Deposit (cd)
    • An IRA,
    • TreasuryDirect or
    • A Prepaid Card

    Entering the sweepstakes puts your name in a weekly drawing for $100.00 and one drawing of $25,000.00. Your name is entered for the $100.00 every week after you submit your form. If your name is drawn and you win the $100.00 you won’t be entered in any more weekly drawings, but you will still be eligible for the $25,000.00 prize at the end of the sweepstakes.

    Other resources and incentives

    There are many other tools for getting out of debt, and some of them offer similar incentives. The Michigan Free Tax Help website has a list of personal finance resources that can help you learn how to get out of debt.