Being Smart with your Tax Refund

Being Smart with your Tax Refund

NEW YORK (MainStreet) — If you're waiting for a tax refund right about now, you're not alone. According to Time, 75% of taxpayers receive a refund each year and the average amount of a refund this year is just under $3,000.

You might be hoping to purchase a new big screen television to enhance your March Madness experience or you might be hoping for a down payment on a family vacation to Disney World.

However, financial experts say that if you're expecting a refund, you should spend the money a little more wisely, on items that might actually give you a return on your investment.

Of course, ever taxpayer is different and each situation unique but here are ten ideas on how to spend your tax refund and reap more rewards:

1. Emergency Fund: It may not be sexy or even fun to put your money back into an emergency fund, but it could save you in the event of, well, an emergency. If this past recession taught us all one lesson, it's that our lives can change in a minute. Colin W. Kimpel, a certified financial planner with Capitol Financial partners, recommends that you have three to six months of emergency funds built up in case the unthinkable happens.

2. Extra House Payment: "Making double or triple payments on your mortgage give you benefits that you might not consider," said Patrick Morris, CEO of HAGIN Investment Management. "Accelerating a mortgage has a payoff that you can calculate based on the interest rate and term of the loan." Morris explains. "Technically you are either prepaying future interest or, if you have had the mortgage long enough you are cutting into the principal. Either way, it is important to think about the fact that even $1,500 dollars that you can prepay over the life of a 20 year 3.85% mortgage is about $3,200 - so you have 'made' $1,700. This may be too remote for people to really get excited about, but it is real money."