How to Spend Your Tax Refund

Dear Cubicle Coach,

What's the smartest way to spend my tax refund?

We asked five experts:

Ah, the beloved windfall. If you're anything like us, the thought of your tax refund evokes visions of spa days and shopping sprees. But before you fill that virtual shopping cart with those $200 jeans-of-the-moment, consider using your cash toward something with a more lasting effect. In debt? Pay it down! A much-needed thermal seaweed wrap might soothe and rejuvenate temporarily, but nothing says detox like a zero balance on your AmEx. Determined to keep the fun in your refund? Use it for that vacation you've been putting off. Quality time away from work is essential to your overall well-being, and with the economy in its current dismal state, cheap fares to fabulous destinations are just a click away. Consider it a stimulus package for your sanity. —loriandlindsey, Bloggers

Make sure you have the basic wardrobe essentials for work! The basic pieces that everyone should have are: white shirt, jeans, trench coat, black dress, black skirt, black pants, and comfortable black shoes. If you don't have them, now is the time to invest in them especially with all of the bargains going on out there. You may also want to choose two or three fresh spring pieces to liven up your closet. Then, use the extra money you have left to save and prepare for your future. Stick it in your savings account. If you don't have one, now is the time to open one up!Workchic, Office Attire Experts

Though I would love to say go purchase those new Louboutin shoes, that probably isn't the smartest way to spend the money. I would start with your debt first. If you have credit debt, pay it off. Credit cards are raising interest rates left and right, and it would be a serious bummer if you got stuck paying off that $100 jacket at 28 percent interest. Next, put the money in savings. At this point no one knows how long the economy will be in a slump, and who knows the next time you will get a flat tire or need to get your computer fixed. You cannot control the economy, nor can you foresee car or computer problems, so it's best to be prepared. —Stacy Lucier, Marketing Manager

Do you have a little saved for an emergency (a real emergency, not a shoe sale at Nordies)? If so, then I would recommend putting it toward your unsecured debt. If you want to invest a portion of your refund, money markets and CDs are your safest bets right now.Janet Ziegler, Blogger

Do you have overdue bills? Credit card debt? Student loans? Any of these items can take a toll on your credit score, and paying them off will only help you. Bills that are overdue should be paid first. Next, look at your credit cards. Credit scores are heavily influenced by the proportion of available credit you have used up. Do you have a card with a $1,000 credit limit that you have spent $700 of? That's a 70 percent debt rate, which can look very bad on a credit report. Ideally, you shouldn't use more than 30 percent of your overall available credit. After bills and credit cards, the next smart thing to do with your money is save some of it. If you have an IRA already, consider putting some of your refund aside for retirement. A high-yield savings account can also be a great option, and you can find great rates at banks such as ING, HSBC, and E*Trade. The last thing you should spend your check on is a self-investment. If you own your own home, consider doing some home improvement, like purchasing new leak-proof windows to save on heating and air conditioning. If you drive a lot, take your car to the mechanic and have it given new brakes, shocks, or have the engine cleaned. Or think about your work wardrobe — take your suits to a good tailor and have them altered for a custom fit. —Kate Hutchinson, MBA Candidate

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