Using Your Tax Refund

By IRS estimates, almost 75% of consumers can expect a refund this year. The average windfall: $2,899. Kelli Grant, Senior Consumer Reporter for, gives suggestions on how to spend it.

The average household has nearly $6,000 in credit card debt, more than $15,000 in auto loans and $29,500 in student loan debt, according to That refund could make a significant dent in a debt with a high interest rate, giving you a little breathing room on monthly payments going forward. For fixed payments, check first that there's no penalty for paying down the balance in a big chunk.

Americans have been saving more in this tough economy, but we're still putting away just 3.7% of our income. That's pretty low. It's a smart idea to have at least six months worth of living expenses set aside. Not there yet? Consider putting aside the refund so you'll have cash on hand the next time your car needs repairs or there's an unexpectedly large vet bill.

$3,000 makes a nice contribution to a retirement, college savings or investment account. Or a good jump-start if you've been meaning to open such an account but haven't gotten around to it. With compounding over the years, it'll be worth much more toward important goals. Depending on the account, a contribution can also help your tax bill next year.

If the rest of your financial picture is in good shape, it's OK to splurge a little - although you should still put a good chunk of your refund into savings. Just don't spend on impulse. Plan for it so the money isn't wasted. A recent PriceGrabber survey found nearly half of consumers want to put their refund toward a vacation. Another idea: use it for your holiday shopping later this year.

Getting a refund is like giving the government an interest-free loan. It's a sign that your paycheck should probably be a little bigger the rest of the year. Talk to HR about adjusting your tax withholding so things are a little more even come tax time next year. Just make sure you budget smart uses for that extra in your paycheck, instead of treating it like a windfall.

For more information on smart uses for your tax refund and other consumer tips click here.