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The Best Ways to Use a Few Hundred Dollars

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Sometimes it can feel like you need thousands of dollars to move the needle on your finances even a little bit.

So if you find yourself with a few hundred dollars--say from a tax refund or an unexpected windfall--the temptation to spend it can be great. After all, how much difference can $500 make? But used wisely, even a few hundred dollars can put you on the road to a more financially secure future.

Here are some ways to make even a small amount of money count:

Start an emergency fund. Ideally you want six months of living expenses stashed to cover unforeseen expenses, but $500 is a good start. And once you have a good start, it can spur you to keep contributing.

Take advantage of compound growth. Before spending that money, consider putting it into your IRA (individual retirement account). Not only will compounding increase your balance over time, but increasing your pretax contributions may cut your tax bill.

Save for a bigger-ticket expense. Whether it’s for a major house renovation or a dream vacation, put the money in a credit union savings account; whenever you have a little extra money come in, set it aside as well. You could end up with a gift the whole family will cherish for years.

Donate to charity. If you itemize deductions on your tax return, consider helping an organization whose works you admire. It might ultimately mean more to you than spending the money on yourself and your gift might be tax deductible.

For many of us who have recently graduated school or are still in school, tax season can be a happy time financially. Many people will get a tax refund from the IRS, and more will squander that money before it has a chance to make it through one statement.

Here are some ways to spend it responsibly and feel good about it:

1. Let it grow. Consider putting all of that money or part of it into a CES Credit Union savings account or, for $500 or more, a share certificate. Instead of just holding on to it, why not let it grow while it’s sitting in your savings? Talk to the friendly folks at your credit union about the right fit for your financial situation. Both savings accounts and share certificates provide you with quarterly dividends which means your money will grow the longer it sits in there.

2. Invest. If you’ve been waiting on an injection of extra cash to take the first step, consider this your investment window. Finding the right investment opportunity for you and your financial outlook is much easier to do if you’ve got the cash on hand. Talk to your credit union to see what advice they offer for starting your portfolio.

3. Pay it off. This one ties in closely to suggestion No. 1. If you’ve got a credit card, car payments or student loans consider paying them off, or at least take a big chunk out of them! Take a look at your obligations and see if one of them can be knocked out all at once with a portion of that tax refund. Throwing $500 at a $30,000 loan seems like a drop in the bucket, but it will help lower your principal which will decrease your interest and save you more money in the long run.

As always, consult your tax advisor before implementing any of the options presented. No content should be construed as legal or tax advice.

Happy tax-refund season! Spend responsibly.

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