8 Ways to Use Your Tax Refund

This time of year is when many people file their taxes in hopes of getting a tax refund. A tax refund is free money you get back when you file your taxes. A better way to get your tax refund is to increase your tax withholdings and get your money back during the year.

Getting your tax refund at the end of the year helps the IRS make money but may not help you as much as you think. Some people are not very disciplined and when they get a large sum of money them don't spend it wisely. In some cases they are worse off with the tax refund than they were before they got the refund.

Don't make that mistake. Use your tax refund wisely and improve your financial situation. Do even better next year than you did this year. Here are 8 ways to spend your tax refund.

1. Pay down debt. Pay down credit card balances first, then pay collection accounts, judgments, liens, then pay extra on any loans.

2. Create an emergency fund. Create a savings account to cover bills for 9-12 months.

3. Invest it. Start a retirement account. If you don’t have a retirement account with your employer sign up tomorrow. You can also start you own individual retirement account in addition to your employer account.

4. Save for your children's college education. If you haven't already done so start saving for your children's college education. College tuition increases at 3 times the rate of inflation. Put the money in a 529 plan.

5. Purchase a home. Now is a great time to buy a home. Use the money to put towards down payment and closing costs.

6. Repairs. If your home need major repairs use the money to fix them.

7. Increase job skills. Take an inexpensive class to boost your skills at work. This can help you find a job or increase your chances of staying employed.

8. Donate. Make a tax deductible donation which you can write off on your taxes next year.

Another way to get a tax refund is to check to see if you have an unclaimed refund from a previous tax year. Contact the IRS for more information at irs.gov.

What to do With Your Extra IRS Tax Rebate

Approximately 117 million Americans will receive a tax rebate of $600 for individuals and up to $1200 for couples plus an additional $300 for each child. To qualify for the rebate you must have paid federal taxes in 2007 and have a valid social security number.

For individuals making over $75,000 and couples making over $150,000 the rebate will be reduced. If you owe back taxes the amount owed will be deducted from the rebate check. Americans who didn't earn enough to pay income tax but had an earned income of at least $3,000 would receive $300 for individuals and $600 for couples. Checks would be received 60 days after the legislation is finalized.

The government is hoping the checks with encourage Americans to spend their money to help jumpstart the economy. Unfortunately so many Americans are living paycheck to paycheck and are struggling to make end meets that for some the tax rebate check will not change their current financial situation. The focus of Americans is not let me go shopping, it is, "Where I am going to find enough money to go to work, pay for daycare, pay my mortgage"? The tax rebate money could results in responses like, "I needed this but I need more, a lot more."

Americans are losing their jobs almost monthly, companies are downsizing, the cost of gas is increasing, grocery prices are increasing while home prices are decreasing. Americans need long-term solutions. After the tax rebate is spent most Americans will be in the same financial situation as they were before receiving the tax rebate. Write your congressman and ask for a better solution to the recession.

Here are 5 tips to use your 2008 Bush tax rebate wisely.

1. Don't use the money to go shopping
2. Use the money to pay a debt or monthly expense
3. Open an emergency fund or savings account
4. Open an investment account
5. Buy basic necessities needed