Don't Blow That Tax Refund!

CORPUS CHRISTI - Early income tax filers generally have one thing in common - they're expecting a refund. As IRS checks begin arriving, local credit counselors know that some will spend those refunds foolishly.

"In essence, they blow the money and then have little or nothing to show for it," says Lori Pridgen, director of community relations for Consumer Credit Counseling Service (CCCS) of South Texas. "Some people even depend on it to pay property taxes and other annual expenses, a very dangerous practice. No one should ever become delinquent on bills because they are waiting for their IRS check to come in," warns Pridgen.

Another mistake is to perceive a refund from the IRS as "found" money. Many tax payers tend to forget that their refund is in fact "earned" money. Pridgen says that if people receive large tax refunds each year, they should consider reducing the amount of withholding at work.

If a refund is coming to you, CCCS urges consumers to use it constructively. Here are some suggestions:

• Save half, spend half. This is a good practice whenever unexpected money comes your way. Spend some, put the rest in savings, and then try to forget about it. Establish a "set aside" savings account for annual expenses like Christmas, back-to-school, vacations, insurance, etc. Withdraw funds from the account to pay these expenses as needed.

• Fix up around the home. Put some money into your most valuable asset, increasing the home's value and your sense of comfort and pride. A refund may be the perfect opportunity to paint, replace an appliance or carpeting, or to buy that home computer or security system.

• Invest in the future. Start a retirement account or invest for your child's education. Visit with a financial planner to assess financial goals and strategies.

• Pay down debt. Pay off smaller credit accounts or make extra payments on the principal balance on your mortgage or car loan. Make paying off debts a priority, as well as being more cautious about creating new debt obligations. A tax refund should not be used as a down payment on a new car, for example. That purchase will only increase your debt load and adds another monthly payment to your budget.

• Catch up on delinquent accounts. While this should be a last alternative, use your refund to get current on bills or to pay off old collection accounts. Get current and stay current by using sound money management practices to improve your credit rating.

For additional suggestions or for money management materials, contact CCCS of South Texas. CCCS is nonprofit, United Way agency that provides free budget and credit counseling, debt repayment plans and consumer education. CCCS can be reached by calling 1-800-333-4357 or at www.cccsstx.org.