How to Stretch Your Tax Refund

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Posted on 02/20/2008

Decided how to spend that tax refund check yet? Before you go picking out a new flat screen or ordering up an iPhone, consider these seven ways to stretch your tax refund.

1. Split your refund into different accounts. It even happens to those with the best of intentions. We want to save. Really, we do. But then the refund goes right into our checking account where it turns into a few new pairs of jeans, a pedicure, and that must-have handbag. (Or, depending on your gender group, a few new Xbox games, a gun rack and that must-have gadget.) By asking to have your refund (or at least part of it) automatically deposited in your savings account, you'll ensure that the money sticks around a little longer.

2. Double up on mortgage payments. This doesn't sound quite as fun as blowing that refund on a trip to Vegas, but it's probably a better gamble in the long run. Making a few extra payments now could save you months of payments down the road.

3. Watch out for loan offers based on an expected refund check. Remember what your mom said. If something seems too good to be true, it probably is. There's a lot of competition out there for your refund money. Some companies will make big promises to get their hands on it, like offering loans based on that anticipated payment from Uncle Sam. These loans often carry hefty interest payments. Stretch your refund by buying smart.

4. Donate to charity. Make your refund stretch by donating it to a worthy cause. Helping those in need will give you more bang for your buck because come next tax season you'll have another write-off.

5. Put the refund towards a home improvement project. Fix up the kitchen, apply fresh paint, or spruce up the landscaping. Spending the refund on your biggest investment, your home, will almost guarantee a 100% return on your investment in the future.

6. Buy energy saving products. Upgrading your fridge, dishwasher or even windows will stretch your tax refund by lowering utility costs. Also, the IRS provides tax credits on qualified energy-saving purchases. That could help improve next year's refund. Sears and Home Depot both have an excellent selection of energy-saving appliances.

7. Invest in something that will save you money. The idea is you've got to spend money to save money. Sound a little off? Here's an explanation. If you find yourself spending big bucks at Starbucks, spend some dough on a nice espresso machine and commit to becoming your own barista. Addicted to movies? Rather than forking over the funds at the theater, try a movie subscription service like Netflix or Blockbuster Total Access. Like facials? Buy products to create an at-home spa treatment. You get the idea.

By Alison Storm

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