• Client Info
  • Realtor Info
  • Seller Login
  • Contact

Boulder Property Network

Boulder Property Network

Boulder County Real Estate

  • Home
  • Search Real Estate Listings
  • Duane’s Timely Topics
  • Results Count
    • Why We Work by Referral
    • Testimonials
  • Our Team
    • Timmy Duggan
    • Barb Passalacqua
    • Kelsey Jensen
    • Duane Duggan
  • Real Estate Blog
You are here: Home / Boulder Real Estate Blog / Top 5 Ways to Use a Tax Refund

Top 5 Ways to Use a Tax Refund

May 25, 2010 by The Boulder Property Network

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.

Filed Under: Boulder Real Estate Blog

Contact Us

  • This field is for validation purposes and should be left unchanged.

Blog Archives

Featured Listings

$199,700For Sale!1199 Brainard Lake Ward, CO 80481View Listing
Lot 12: $173,000 / Lot 13: $174,700For Sale!0 5th St (Lot 12 & 13)Nederland, CO 80466View Listing

See all of our listings.

Recently Sold Properties

389,700Sold3365 Chisholm Trl B101Boulder, CO 80301View Listing
$2,997,000Sold3080 Galena WayBoulder, CO 80305View Listing
$649,700 Sold271 Jefferson AveLouisville, CO 80027View Listing
$628,700Sold170 Golden Gate Canyon RdBlack Hawk, CO 80422View Listing
$655,000Sold2323 Buttercup CtSuperior, CO 80027View Listing
$595,000Sold1513 Sepia AveLongmont, CO 80501View Listing
$873,000Sold5455 Lee Hill DrBoulder, CO 80302View Listing
$451,000Sold311 Windance RdEstes Park, CO 80517View Listing
$235,000 / 280,000Sold765 Pine St & 797 Pine StNederland, CO 80466View Listing
$770,000Sold705 Club Pl.Louisville, CO 80027View Listing

Tweets by BoulderPropNet

Download our App

Boulder Property Network AppGet the Boulder Property Network mobile app to start your search for a new home right from your phone or other mobile device!

Download it here >>

Neighborhood News Report

How's the market? We can provide you with accurate information on the real estate market activity (Listings , Sales & more) in the area you are most interested in!

Get your Neighborhood News here >

Free Home Valuation

Free Market ReportBoulder Property Network can provide you with the information that you need to make a plan for your real estate purchase or sale.

Get your home valuation >>

Looking to Sell?

Looking to Buy?

Information for Investors

Recommended Reading for REALTORS®

REALTOR® for Life

by Duane Duggan

realtor-for-lifeWhat does it take to be a REALTOR® for life? This book provides first hand knowledge from one of the most distinguished and active careers in real estate. Duane Discusses his newly published book here.

Purchase on Amazon

© 2023 Boulder Property Network • RE/MAX of Boulder Inc.
2425 Canyon Blvd. #110, Boulder, CO 80302
800-825-7000 x611

Boulder Property Network on FacebookBoulder Property Network on TwitterDuane Duggan on LinkedinOur listings on YouTubeDownload our Listings App
Site Map