When that interest-free loan gets paid back …

You know the one I’m talking about … your tax refund! 😉

When I saw the Liz Pulliam Weston article

7 smart ways to spend your tax refund

I saw the word “spend” and thought, “Oh great, just blow it on junk, why don’t you!” But I was wrong in this assumption. Some excellent advice in here. Here are the seven ways she mentions:

• Blow (some of) it. This is the only semi-reckless suggestion of the bunch, but it does serve a purpose. It’s kind of like cheating on a diet. If you deprive yourself of everything that you liked before, there’s an excellent chance that you’ll snap and eat 37 hamburgers at once. So, she suggests that you “blow” 10% of your refund and have a good time.
• Pay your credit cards. Use that interest-free-loan payback from Uncle Sam to pay down your decidedly non-interest-free loans to Mr. Visa and Dr. Discover.
• Fund your retirement. Contribute to your 2006 IRA. Step up your saving in your 401(k). Or just invest it anywhere you see fit.
• Boost your emergency fund. Having 3-6 months of living expenses is probably as important a use for money as paying down credit card debt. This should be in cash or some other easily liquidated investment vehicle.
• Contribute to a college fund. There are several advantages to starting a 529 plan for your child(ren). (For those interested in college funding strategies off the beaten path, check here. There’s an e-mail at the bottom that you can use to get a free report. Note: this is not for the faint of heart!!)
• Continue your education. These last two tips were the best two, as far as I’m concerned. Instead of investing in stocks, bonds, or the like, invest in yourself! Learn a new skill or update the ones you have. It helps to keep yourself marketable and valuable.
• Attend a conference. Same reasoning as above, plus you get the chance to make business contacts.

(Oh, in closing, she says adjust your withholding so that your refund isn’t so big next year!)