Helena Talbot's blog - Top 5 Ways to Use a Tax Refund

Thousands of Americans are receiving income tax refunds from the U.S. government, with the IRS reporting an average refund of $2,940 this year. In the current economy, consumers can make strategic choices to make sure that refund pays off for them.
As a member of the Top 5 in Real Estate Network®, my clients often ask me about financial matters, including advice on smart ways to manage income tax returns. According to Freedom Tax Relief (www.freedomtaxrelief.com), many tax refund recipients might be thinking of creative ways to spend that cash as the economy starts to recover. But before getting carried away, they suggest thinking more long term. 
Freedom Tax Relief suggests the following as the top ways to wisely spend an income tax refund:

1. Pay down credit card and other high-interest debts (including payday loans). Few investments can top the rate of return for eliminating debt. Paying off credit card debt at typical interest rates effectively makes an investment that returns 20 percent or more per year. The only caveat: Be certain you change your mindset as well. If you pay off debts, only to charge up the credit cards or sign for a new car loan a few months later, you have ultimately gained nothing. If credit card debt is your problem, cut up or freeze your credit cards to ensure you do not re-create the same problem you have left behind. Use a debit card for future purchases that require a card. 

Ready to pay down your debt? List and pay secured debts first (mortgage, car). Mortgage payments should take absolute priority. Then list unsecured debts (credit cards, loans) in order of highest interest rates. Make minimum payments on all but the highest-rate card. Use every cent of available income to make large payments on the card with the highest rate. When that card is paid off, apply the big payment plus the old minimum payment on the next-highest rate card until it is paid off. Continue until all debt is eliminated.

2. Create an emergency fund. The Great Recession has pointed out the importance of an emergency fund. Those who do not yet have enough readily accessible money set aside to cover several months' worth of expenses should consider a tax refund a prime opportunity to create a fund that ultimately includes 6-9 months' living expenses. These amounts are not necessarily equal to salary. Instead, they should include only what the household would spend if it were in dire straits. House these savings in a money market fund or rolling CDs so that the money earns interest and cannot easily be spent -- but can be accessed in an emergency. 

3. Make sure you have adequate insurance. Everyone should have health, auto, and home or renters insurance. If dependents rely on breadwinners' income, look into life insurance. Consider an umbrella policy to protect from additional liability. And if the household could not survive without an income, purchase disability coverage. This is a huge savings step – one trip to the emergency room or one minor accident can easily end up costing thousands or tens of thousands of dollars out of pocket. 

4. Fund the future. Contribute to retirement savings, whether an individual or Roth IRA, 401(k) or other plan. 

5. Invest in the home. Homeowners might consider using refunds to cover major or minor maintenance to make sure no bigger (and more expensive) problems arise down the road. In addition, these capital improvements can create additional equity in a home. 

No matter how big or small the amount, and despite the temptation to celebrate and splurge, make your choice on what to do with any refund carefully, experts say. Take time to make sure your money works for you and helps build wealth.

I specialize in helping buyers and sellers invest in real estate in Loudoun County and Northern Virginia.

I have over 25 years experience in the real estate industry.  As a Broker/Owner with Exit Realty Talbot and Company, I bring special tools and solutions that enable me to exceed the expectations of my clientele.  If you are considering listing your property in Loudoun County or the nearby areas, ask me about our latest internet marketing systems.  I would appreciate the opportunity to earn your business.  I am experienced in listing and selling short sales.  For information on the short sale process, please visit  www.LoudounShortSaleSolutions.com.

For a free market analysis on the value of your home, please visit http://www.LoudounHomeValues.com

My past awards and designations include – 2003 President of the Dulles Association of Realtors, 2003 Dulles Area Assoc Realtor of the Year, Salesperson of the year 2000 Dulles Area Assoc of Realtors,  Top Producer awards from both the Dulles Area Association and the Northern Virginia Association of Realtors.  I am a member of the Top 5 in Real Estate Network.

I have lived in Loudoun County since 1979.  I am married with two grown children and two grandchildren.  My son in law is my business partner in real estate.  I love to jog in the mornings and spend time relaxing on my Trawler during the summer months.

Loudoun County and Northern Virginia Real Estate Sales and Solutions – Helena Talbot, Broker. I specialize in helping buyers and sellers invest in real estate in the Northern Virginia area to include Loudoun County and surrounding areas including Fairfax, Clarke, Fauquier, Prince William  Counties.  Our local neighborhoods includeLeesburg, Ashburn, Sterling, Potomac Falls, Brambleton, Broadlands, Lansdowne, River Creek, Belmont Country Club, Beacon Hill, Shenstone, Waterford, Lovettsville, Purcellville, Hamilton, Round Hill and Bluemont.                        Cell 703.727.9885    Office 703.574.3800

Free iPhone/Android Mobile App to search Northern Virginia real estate.  2 easy ways to get the App:  Text “Exit9” to 87778 or enter http://87778.mobi/Exit9 into your browser.