By Cara Baruzzi, Register Business Editor
cbaruzzi@newhavenregister.com

Many have already received their tax refunds and spent them soon after they arrived in the mail or in their bank account, but financial experts advise those who filed for an extension or otherwise haven’t gotten their refunds yet to think before they burn through money.

“I’ve seen too many instances of irresponsibility,” said Bill Saas, a certified public accountant and partner at Saas Kirwan Associates in Wallingford. “Everyone’s entitled to a good time” but consumers should resist the urge to should spend all of their refunds on unnecessary expenses, he said.

Those still mulling what to do with their refund checks should, according to the Connecticut Society of Certified Public Accountants, consider using them to:

‰Get out of debt. Work on reducing debt that has the highest interest rates first. This usually means attacking credit card balances, and vowing not to use the cards once balances are paid down.

“First and foremost, those credit card balances are the atrocities to end all atrocities when it comes to having a financial plan,” Saas said, noting many have high interest rates.

It may seem more fun to splurge on a nice vacation or new item for the home, but putting tax refund money toward eating away some credit card debt is a wiser move, especially in the long run. Paying off credit cards and other consumer loans spares borrowers from paying the interest that would have accrued during the months and years in which balances remained.

Paying down loans such as mortgages is also a good use of a refund, but may not be as much of a priority for those with a lot of credit card debt.

Once the cards are paid down, try not to use them and rack up new balances, Saas said.

“Those credit card problems, with interest rates, are analogous to addictions,” he said, noting it can be difficult for some to stop using plastic to pay for things they can’t afford at the moment.

‰Increase reserves. Those who aren’t happy with the amount they are saving, either in a savings account or retirement fund, should think about stashing away tax refund money. Continued...

• 1
• 2
• See Full Story

Consider putting the money in a savings account or secure investment, or opening a retirement fund.

“We encourage people to build for the future,” Saas said, adding that those who chose to invest the money should be sure they have a balanced and diversified investment strategy.

‰Make needed repairs. Urgent home repairs or needed new tires on a car can be a good use of refund money.

Keeping up with home and car maintenance now may save consumers money in the long run by preventing more serious problems from occurring later.

‰Think ahead. If major expenses are looming in the future — college tuition or holiday shopping, for instance — reserve the tax refund for those costs.

‰Have some fun. While accountants urge against a big splurge, a small part of the refund can go toward a reasonable indulgence. It is just important to keep one’s financial situation in mind.

Instead of a week in the Caribbean, book a weekend at a nearby bed-and-breakfast, for example. Or buy a new appliance rather than renovate the entire kitchen.

Those who allow themselves some rewards are more likely to use their money wisely overall, according to the CPA group. So those who can manage it should indulge in one affordable luxury. However, be sure any spending fits into the overall household budget.

Contact Cara Baruzzi at 203-789-5748.

• 1
• 2
• See Full Story

• 1
• 2
• 3
• See Full Story

• 1
• 2
• 3
• 4
• See Full Story

• Return to Paging Mode