Watching Your Wallet: Tips on how to use your tax refund

WATCHING YOUR WALLET: How to use your tax refund wisely

(Investigate TV) - Most of us look forward to the time of year when we receive our tax refund.

If you filed your taxes early, you might be receiving your tax refund check soon.

Investigate TV’s Rachel DePompa spoke with experts at the finical website, NerdWallet, who say you should fight the urge to spend that money on a shopping spree.

However, experts say you should not spend a penny of the refund without considering these three options.

If you are carrying around high-interest debt, like a credit card with an interest rate of 6% or higher, experts recommend you pay that off first. Financial advisers say paying down the debt will save you money in the future from paying interest.

Arielle O'Shea with NerdWallet says you can also use your tax refund to create or boost an emergency savings fund.

Experts say you need to have at least $1,000 in savings. Once you have that saved, experts recommend you work to increase the amount of the emergency fund so it’s large enough to cover three to six months of expenses.

The third option you should consider is investing your tax refund.

“You can’t put a lump sum into a 401(k) most of the time, but you can put a lump sum into an IRA and if you don’t have an IRA, this is a good time to open one,” said O’Shea.

Spring is also a good time of year to look at how much you are withholding from each paycheck.

Experts say it might be a painful concept, but ideally, you don’t want to get this windfall of money. Instead, experts say you want to get this extra money in your paycheck. If you do that, then O’Shea says you can direct that money back into your 401(k).

For tips on filing your taxes CLICK HERE.

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