Tax time is here and for some lucky folks, that means a nice tax return! What can you do with a bit of extra cash? Here are the top 5 ways to use your tax refund and have some fun too!

1. Become an Angel Investor

You may not have huge loads of cash, like famous angel investors, but what you do have can help someone start a business. There are numerous sites that will help you fund social or business projects worldwide. Some sites, like Prosper.com, will allow you to lend your money to others for a specific purpose and then gain interest on that money. Other places, like Kiva.org, aren’t commercially oriented to provide a large return in interest, but they will make you feel good for helping a worthy cause.

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There’s been a lot of talk of “strategic defaults” on home loans. These are loans where the buyer may have the money to continue paying the mortgage, but their home’s value has plummeted so much that they’ll never recoup their losses. Average house prices in 2009 decreased, and in some foreclosure prone areas a home may have lost from 30 to 50% in value. Thus, homeowners faced with that bad news opt to walk out of the mortgage, default on the loan, and start over – making the bank take the financial hit for the loss is home values. Is this really smart? Before you consider taking such drastic measures, there are some things you may want to consider first.

What Will It Do To Your Credit?

In a society that increasingly relies on a good credit score to determine your trustworthiness, a strategic default may still leave a blight on your credit record. You may have difficulty obtaining loans for cars, a new home, and even getting a job as some employers now check your credit scores. Unless you’re independently wealthy, a strategic default is going to have a dire impact on your ability to get future financing on many things.

Will You Owe Taxes?

Maybe the lender will stop coming after you for a monthly payment, but the IRS may start to hound you for the difference in what you owe and what the bank paid at auction for your home. If you borrowed $250,000 and the house was valued at $200,000 and sold at auction, even if it was to the bank that issued the mortgage, you may have a deficit of $50,000 that can be viewed as income by the IRS in some states.

Watch Out for Deficiency Judgments

In addition, the banks or other collectors may try to seek deficiency judgments in court, causing you to not only undergo a foreclosure, and later a bankruptcy, to keep from losing everything. Even if you agree to let the bank keep the home, you must get it in writing that the account is settled in full. Otherwise, if the deficiency amount is sold to collectors you will continue to be hounded until that amount is either paid up or written off in bankruptcy.

Seek Legal Counsel

Even a decision that seems right can have vast implications going forward. If you’re considering foreclosure, always seek legal advice first to keep from being surprised later on. Make sure you understand the tax and debt ramifications of such a move, before opting to just simply walk out on your mortgage. It could be that it’s a better idea to hold onto the property five to ten more years and then sell it, once the market improves in your area, versus waiting seven years for a blot on your credit score to clear. Once you understand all the impact this decision will have on your future financial security, you will be more confident that the decision you make is the best for you and your family, and not just an easy out of a tough, and somewhat temporary, situation.

Do you want to get a second payday loan? There are individuals out there that would love to have a second payday loan, even while they are still paying off the first.  This is usually due to a stressful situation. This type of person is in a debt cycle.  This cycle is usually where they are living pay check to pay check without being able to pay down their debts, and worse, they usually continue to add to those debts.  They may have five credit cards that are all maxed out, a mortgage, second mortgage, car loans, and student loans.  They may even have medical bills that are piling up and in comes a car repair bill.  We could outline just about any type of situation as to why one might want a second payday loan, but instead we will look at whether or not you can get a second payday loan.

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After we graduate from high school, we have decisions to make that will truly affect the rest of our lives. When we commit to either a full-time job, college or even both, we are maturing and need to start to consider our financial realities. In many cases, we are on our own and must take care of our bills on our own, which can be very difficult with a low-paying entry-level job. In many cases, we must find a way to make end meet with limited help from our parents. They sometimes pay for our schooling or help us secure loans to do so, but with current salaries, our parents are often stretched to the limit. We need to find ways to cut corners for our and their financial situation. Fortunately, there are ways to cut corners and spend wisely that will help us get by when we are in college. Making sure we have a budget that lets us know when we will have shortfalls is essential. We can manipulate our spending and know when we can and can’t buy certain items.

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Many millions of Americans are out of work, and many are claiming unemployment insurance. While it’s a wonderful benefit to have when times are tough, it may not be clear to those receiving it that it is taxable income. Unlike current salaries that automatically deduct your owed taxes from your paycheck, unemployment insurance often requires that you make estimated tax payments to cover any shortfall in owed taxes the following year. This can be a difficult concept for people who have never had to file an estimated tax in their entire lives. Many simply fail to do so and then they get hit with a large tax bill the following year.
Be aware that you will owe taxes on unemployment insurance. How much you owe is what you really need to determine right off the bat. If you are married, and filing a joint return, try to estimate what your total income is and what deductions you’re allowed, to determine ahead of time how much you might owe. You can either choose to pay estimated taxes if you think you will owe at the end of the year, or decrease the withholdings on your spouse’s paycheck to help you at year’s end. File an estimated tax form 1040-ES or have them withdrawn automatically from your unemployment checks, by requesting that to your local unemployment office.

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Do you want to be rich or poor? Do you just want a reasonable retirement income so you can enjoy your retired couple’s activities? Many retirees have returned to work, finding their savings and investments wiped out from the Great Recession of 2008. To retire these days it takes careful planning and good investment advice. Watch all your resources with a careful eye, and you can still find a spare half a million to add to your retirement account.

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If we lived in a perfect world becoming wealthy wouldn’t be hard to do.  However, our world isn’t perfect and it takes a little bit of work to become a millionaire.  If you have children it is the perfect time to begin amassing a small fortune for them.  The best time to start this path to wealth is when they are newborns if at all possible.  You don’t have to put a lot of cash away for your child when they are infants, but it should be done on a monthly or even weekly basis.  Teaching your children about finances is probably one of the best things you can do, and if they have their own account they can see proof of your teachings.

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Unlike the controversial health care mandate, most people agree that Washington would do a better job than banks at regulating student loans. The problem with lending has been varied, from banks charging higher rates, to students getting in trouble repaying loans with salaries after college that can’t support minimum payments on pricey education. Despite some major flaws in the system, and public opinion in favor of this legislation, there was a bitter debate over whether on not nationalizing the student loan program was a good thing. However, instead of scrapping a valuable program, the Federal government has decided to centralize it and manage the program itself.

Congress Votes

The vote was cast with a 56 to 43 vote in favor in the Senate. In the house, the bill passed with 220 to 207 in favor. That means that on July 1st, 2010, all federal student loans from here on out will come directly from the federal government. This blocks lenders like Sallie Mae, private banks, and even Nelnet from making loans to students, even though they’ve previously contracted them before. This ends a nice subsidy for private lenders that they used to make quite a bit of money off low-income student lending. The new changes are said to save the Federal government $61 billion dollars after 10 years. The hope is that much of that can be used to pay down the deficit and provide further funding for low-income students in the form of Pell grants.

Who Benefits Most?

Actually, it’s the student borrower that should see better days with this legislation. The Pell grant awards will shift from $5,500 dollars to a maximum of $5,900 by 2017. It may seem trivial, but with more Pell grant funding, more low-income students will, hopefully, be able to afford to go to college.