Higher savings balances motivate people to save more. It is recommended that people have 3-6 months of living expenses set aside in this account. Pay down your highest interest rate debt. Carrying credit card debt over from month to month can cost consumers thousands annually in interest. Paying off small balances or making a dent in large ones not only saves money, but reduces stress.
Some people use overwitholding on their income tax as a method of saving throughout the year.
These people lose the benefit of earning interest on the funds. However, paying for necessary major expenses with income tax refunds is smart. Make home improvements. If your home needs major repairs such as a new roof or electrical work or if you are thinking about making more cosmetic improvements, your refund could help accomplish these tasks and, simultaneously, increase your home equity. Contribute to your IRA or retirement.