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Here are tips on what to do with your tax refund

Although tax season can be the most dreaded time of year, many consumers look forward to getting what's owed to them. According to the IRS, the average tax refund in 2008 (the latest year for which they have compiled data) was $2,900. Americans m...

Although tax season can be the most dreaded time of year, many consumers look forward to getting what's owed to them. According to the IRS, the average tax refund in 2008 (the latest year for which they have compiled data) was $2,900. Americans more than ever are choosing to e-file and with more consumers filing their income taxes before April, the extra cash can't come soon enough.

Financial counselors at The Village Family Service Center offer the following tips for managing your tax refund:

Avoid refund anticipation loans (RAL) or other refund products. An RAL is an extremely high-cost bank loan secured by your pending tax refund, which you have to pay back even if you don't get a refund. If you're looking for a quick refund you can get it within two weeks or less by e-filing and having the refund directly deposited into your account. You can e-file for free if you earn $58,000 or less. Also consider the Volunteer Income Tax Assistance (VITA) program, Tax Counseling for the Elderly (TCE), or AARP's Tax-Aide--all offer free tax preparation for low-income taxpayers.

Contribute to, or open, an emergency fund. Most people don't have money stashed away for unexpected emergencies. Your tax refund is a great way to start. NFCC recommends saving three to six months of living expenses. But anything is better than nothing. By placing the cash in a separate savings account or short-term CD, you're less likely to use it and it will be there in case of an emergency.

Pay down credit cards or other high interest loans. Use your refund to pay more than the monthly minimum payments. Add extra cash to loans with high interest rates. Remember, credit card debt is simply an unsecured loan. The longer the life of the loan, the more you'll pay for borrowing the money. If you can't pay them off completely, make an extra payment. By making an extra credit card payment you can reduce your interest costs.

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Invest in retirement. Many workers believe they are behind on their retirement savings. Whether it's your 401(k), IRA or Roth IRA, investing your tax refund now could mean a nicer cushion later. The sooner you start saving, the more time your money has to grow. Make retirement savings a high priority by setting goals, devising a plan and sticking to it.

Service the car and tackle other to-do's. If you've been putting off getting an oil change, cleaning the gutters or fixing the leaky roof - now's the time to cross those things off your list. Using your tax refund to maintain your expensive possessions now could save you money in the future.

Open a 529 College Savings Plan. A college education isn't getting any cheaper. With 529 College Savings Plans withdrawals are tax-free when used for higher education. Plus, some plans come with tax benefits or free grants which may match a portion of your contribution.

Pay down your mortgage. Any extra payments go toward paying down your principal. Paying off your mortgage faster means you pay less in interest. Using your refund to reduce your mortgage debt can mean substantial long-term savings. By making two extra payments a year, you may be able to pay off your 30-year mortgage in 15 years.

Find relief through The Village Financial Resource Center. If you didn't get a tax refund this year because it was withheld to repay certain types of debt, consider contacting The Village. From financial education to debt management services, The Village's certified credit counselors offer low-cost and free financial educational information, money management advice and debt reduction services.

The Village Financial Resource Center is a program of The Village Family Service Center, a nonprofit, community-based organization, and is a Member of the National Foundation for Credit Counseling (NFCC). For more information, call The Village at 1-800-450-4019, or online at www.helpwithmoney.org . The Village office serving Alexandria can be reached at (320) 253-5930.

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