It's that time of year where all those people who overpaid federal taxes to Uncle Sam are looking to get the money back. I hope people do not look at a refund as a gift from the government. It's your money; you just gave them too much of it throughout the year - INTEREST FREE. If you go to the bank and borrow $2500 for a year, you can almost guarantee you will owe more than $2500.

According to CNN Money, the average tax refund in 2007 was around $2500. If you go to the bank and borrow $2500 for one year, you can almost guarantee when you get ready to pay that money back, you will owe more than $2500. Make sure you speak with your human resources department to find out how to adjust your W4 allowances (more on this later).

Through a 4 part series, I will offer you four tips on what to do with your windfall. Be sure to subscribe to SingleGuyMoney to read the entire 4 parts.

One of the first things you should do with your tax refund is setup an Emergency Fund. I call my stash a " Freedom Fund". You can call yours just plain old savings if you want. The name is not important. The important thing is getting started and getting into the habit of saving. I know there are some people that say $1000 is a good start. If you can do $1000 fine, if not, do what you can. Don't avoid setting up some kind of savings just because you don't have a certain amount. You know what amount is comfortable for you. It may be $100, $1000 or $10,000. Again, the most important thing is to get started.

Need ideas on where to save your money? I recommend ING Direct Orange Savings. No fees, no minimum balance and the ability to open multiple accounts for different savings goals. Want an instant 10% return on your money? Contact me for a referral bonus. Open the account with at least $250 and you get a $25 referral bonus (I get $10 - Thanks in advance). If you are looking for a brick and mortar bank, Washington Mutual is currently offering a free checking account and High Yield Savings account. The rate is currently 4.75% APY but may soon drop like the others due to the latest fed rate cut.

3 comments

  1. Tiffany // January 24, 2008 at 6:49 PM  

    Citibank has great packages too. If you open an EZ checking and an e-savings, the checking account is free. EZ checking is also free if you pay two bills online each month. The e-savings give 4% in interest. The Ultimate savings gives 4.15% interest.

  2. Pinyo // January 27, 2008 at 1:59 PM  

    Great point. My family always aim for break even, or to owe a small amount. Why lend to the government for free?

  3. Anonymous // June 2, 2008 at 6:46 AM  

    Citibank has great packages too. If you open an EZ checking and an e-savings, the checking account is free. EZ checking is also free if you pay two bills online each month. The e-savings give 4% in interest. The Ultimate savings gives
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