How to Use Your Tax Refund to Recover from Holiday Spending

Getting a Head Start

If you're depending on your tax refund to help you get a leg up on debt repayment, you're not alone. Many Americans find themselves in a financial pinch after the holidays:

"I try to use credit carefully and take advantage of frequent flyer miles and rewards programs during the holidays," says Briana Gutierrez, a college student in La Jolla, California. “But at the end of the day, I'm usually surprised at how much I spend. My tax refund is my only hope for paying off holiday bills, and I can hardly wait for it to get here."

Filing your income taxes as early as possible is the first step toward getting your tax refund sooner. The start of each tax season can change annually, but it is usually scheduled around the middle of January. Check the TurboTax support site for the official start—that’s the first day you can e-file a return.

Choosing to E-File and Direct Deposit

E-filing is the quickest way to prepare your tax return, and with online tax-prep services such as TurboTax, electronically filing your return is as simple as a few clicks. You can e-sign your return and receive electronic confirmation from the IRS.

Another way to get the refund money in your pocket faster is by requesting that it to be direct deposited into your bank account. This is the quickest and most popular way to receive your money—just be sure to check with your bank before deciding which account to use so you avoid possible delays.

• For example, if you file jointly with a spouse but you want the return deposited into an individual account, your bank may reject the direct deposit, delaying your refund.

The combination of e-filing with direct deposit can typically provide you with your tax refund within 21 days of acceptance, but if you’re wondering when the cash will reach you, you can keep track your tax refund online through the IRS website, Where's My Refund? You’ll need the following information to find your money:

• Social Security number (SSN) or Individual Taxpayer Identification Number (ITIN)
• Filing status
• Exact refund amount

You can also use TurboTax’s Where’s My Refund? tracking guide to help you understand what may be causing delays.

Paying Down Debt

Credit card interest rates can average between 13.9% and 24.5% depending on the type of credit you use, so the best way to speed up your financial recovery from holiday spending is by strategically paying off credit card debt.

Think about it this way: the cost of interest on credit card balances could result in hundreds or thousands of extra dollars if you choose to make only the minimum payments.

Here are some tips for optimal debt elimination:

• Pay off high-interest credit cards first to eliminate the most expensive debt. If you use more than one credit card to cover holiday expenses, consider paying off the entire balance on the highest-rate card before moving on to the others.
• Paying off small balances on credit cards provides not only the satisfaction of eliminating a particular debt, but also reduces the risk of incurring late payment fees if you forget to pay one of your cards on time.
• Make credit card payments on time and monitor your spending to ensure you won't rack up unnecessary fees that will eat away your tax refund. Hefty late fees and over-the-limit penalties, which average about $30 each, can set you back when trying to pay down holiday debt.

Saving and Strategizing for Next Season

A savings plan can help you avoid getting into debt next holiday season. Saving money from your tax return to cover your holiday expenses means you won't need to rely too much on credit the following year. Spending only what you can afford to pay in cash is also one way to minimize holiday costs.

If you decide to borrow again next holiday season, budgeting and setting spending limits can help ensure you don't overspend. Part of the strategy is to use low-interest credit as much as possible—and avoiding store credit cards altogether, which often carry higher interest rates. Taking a proactive approach can help to eliminate excessive spending habits and lessen the financial burden of post-holiday bills.

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