2007_2_calculator.jpgI just did my taxes and I am going to get a refund this year. I'd really like to get a fancy toy, but I feel like I should do something responsible with the rest. What are your suggestions?

First off, congratulations on your refund! We are a firm believer that you should not feel guilty about treating yourself for a year of hard work. However, it's also very important to not overlook some important decisions you can make with this money.

Number one, pay down any high-interest debt that you can, such has credit cards. The sooner you can reduce debt, especially of the high-interest kind, the better. That will improve your credit score and lead to more money in your pocket anyway. Secondly, start thinking about investments. Does your company offer a 401k plan, and more importantly do they match contributions? That's a great way to invest in your future. An individual retirement account (IRA) is an additional way you can save your money. You can't touch the money you save in your IRA until retirement (with some exceptions such as medical emergencies or buying a first home), but this is a good way to make sure you actually save! As a bonus, you have until April 16th this year to make that IRA contribution.

You could also house it in a high-interest savings account, such as an ING Direct account which currently boasts an interest rate of 4.5%. Some banks also have high-interest savings accounts. Citibank, for example, has an e-savings account with a 4.75% APY. You could also put your money in a CD (certificate of deposit) for a fixed term. Bankrate.com gives a list of 10 things to do with your tax refund, which includes things like servicing your car and investing in stocks.

Lastly, according to Forbes.com, if you got a hefty refund, you should recalculate your withholding so that it doesn't happen again next year. Sound shocking? Well, as they put it, the interest rate on the overtaxation of your check is zero. If you were getting that money in your paycheck and having it automatically deposited in a savings account, even $25 per week could add up to $1,300 per year. Pretty convincing if you ask us.

How are you planning on handling your tax refund?

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