North Americans are getting smarter with their tax refunds. According to the National Retail Federation’s Tax Returns Consumer Survey, 43.8 percent of refund recipients — the most in the survey’s history —  plan to save a portion of the cash. Simply saving, however, may not be the best tactic when trying to get the most from the potentially sweet lump sum. [Also see The Worst Ways to Spend Your Tax Refund.]

Whether you plan to be part of this promising statistic or not, consider these tips on how to spend your refund wisely and make the money work for you in the longterm.

1. Prioritize
Take a good look at your debts, savings, investments and upcoming expenses before that tax refund hits your bank account. Doing so will help you prioritize the best outlet for the extra cash, or know better how much to divvy up between accounts.

2. Review Your Withholdings
According to CNN Money, the average 2011 tax return was nearly $3,000. Getting that kind of cash from the IRS is great until you recognize it for what it is – money withheld from your income that always belonged to you. If your among the majority who received a sizable sum last year, adjust your withholdings to ensure more money in your pocket this year.

3. Conquer High InterestTax Refund
A large refund offers the perfect opportunity to pay down credit cards, student loans and medical bills. However, it’s key to conquer high-interest credit cards first to save more money over time. Identify which of your debts carries the highest interest rate and contribute accordingly.

4. Build a Contingency Fund
Personal finance experts recommend six to nine months of living expenses be saved in an emergency fund for those unpredictable events like job loss, home repair or medical expenses. It’s not as fun as buying a new TV but you will feel more secure knowing these funds cushion your finances.

5. Invest in Your Health
Is one of your goals to get in better shape this year? Then put your money where your mouth is and use your tax refund to join a health club, partner with a personal trainer or build an at-home gym. You can find equipment on the cheap at discount retailers or order online with free shipping from Dick’s Sporting Goods or other fitness stores. By boosting your cardiovascular system and improving your overall health, expenditures on future medical expenses will be greatly reduced.

6. Make an Extra Mortgage Payment
An extra payment (or two) toward the principal of your home mortgage will save you thousands of dollars in interest on your fixed loan. Be sure to calculate the correct amount of additional principal and enter the information in the appropriate section of your bill.

7. Consider Your Kids
If you haven’t already, consider using a portion of your tax refund to establish 529 plan/RESP College Savings Accounts for your children. Some states offer partial or full tax deductions for contributors and you can feel secure knowing your kids will not be taxed when they spend the funds on tuition, fees, books, room and board.

8. Prepare for Retirement
Take advice from the smartest of the smart and open a Roth IRA/TFSA with your tax refund. In addition to securing tax-free income at retirement, you avoid paying taxes on earnings and even have the option to withdraw contributions penalty- and tax-free if necessary. Unlike traditional IRAs, your children can receive tax-free distributions from the account once you’re gone.

Andrea Woroch is a consumer and money-saving expert for Kinoli Inc. As a nationally recognized media source, Andrea has been featured on Good Morning America, NBC Today Show, MSNBC, New York Times Bucks Blog, Kiplinger Personal Finance, CNNMoney and many more. To view recent interviews or for more savings tips visit



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