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RISMEDIA, May 2009-(MCT)-Your tax refund may never be more valuable than it is now, regardless of size.

With the pressures of the recession and credit card companies turning into Scrooges, this is a good time to look at your tax refund to help build a safety net and strengthen your future. Here are some ideas:

Sanity first

Many people look at tax refunds as an opportunity to spend.

This year, however, change your thinking: Look at the refund as an opportunity to insulate yourself from a job loss or other financial pressure.

People who deny themselves pleasure sometimes resent it and overspend during financial stress. It’s akin to wanting junk food when you start a diet.

Instead of taking a chance that you will binge on spending, use a small percentage of your refund, maybe 10 percent, to treat yourself and reserve the rest to improve your financial life.

Set up an emergency fund

With unemployment likely to climb above its present 8.5% rate, you need backup savings to last you awhile in the event you lose your job. Financial advisers typically suggest having at least enough to cover three to six months of basic living expenses – mortgage or rent, food, electricity, bare-bones telephone service, car payments and gasoline or transportation costs for job hunting.

Given the severity of the recession, a year of savings would be better.

If you’d like to save for retirement or college but are afraid you don’t have enough emergency savings, one account can provide you options for any possibility: a Roth individual retirement account, which you can open at a bank, mutual fund company or discount broker. Select a CD or a money market mutual fund as your investment choice. Don’t choose stocks or stock funds because they could be down in value at the point of any job loss.

If you navigate the recession without touching that account and have more than five years before retirement or the start of college, that money can be invested in a balanced mutual fund or stock mutual funds.

The IRS allows you to put up to $5,000 a year ($6,000 if 50 or older) into a Roth IRA, and the account can be used for college or retirement. If you lose your job, you will be free to take out your entire deposit.

Get rid of credit card bills

Banks and credit card companies are worried that, in the midst of the recession, you may miss payments. So they are cutting off additional credit for those people with large amounts of debt. And they have access to information on almost everything you owe, and could cut you off if you carry a sizable balance anywhere.

So use your refund to pay off your highest-interest cards first. If you pay off a chunk of debt with the refund, you might be able to transfer the balance to a lower-interest card.

If your refund makes a dent in your balance, keep paying the total you were paying under the higher balance. This is the way to wipe out your debt fast. Minimum monthly payments will never get you there.

Secure your credit cards

If you have unused credit cards sitting in a drawer, haul them out and use them for a small purchase on something you have to buy anyway. Then, immediately pay off the purchase with your refund.

Banks are closing down access to credit cards that are not being used. You don’t want that to happen because you might need all your cards as a backstop if you lose your job.

In addition, when you close a credit card, your credit score will dip if you have a lot of debt outstanding on other credit cards. Why? Because your score partially depends on the amount of available credit you use. Avoid using more than 30% of your credit.

In addition, make sure you don’t spend more than your refund, and mark on your calendar when you will pay off the purchase. This is no time to miss a payment.

Start-again money

When people lose dead-end jobs during a recession, they often decide to go back to school to start a new career. Federal Stafford and Perkins student loans can help with the expense.

If you stash away your refund, it will help with housing, food or other necessities while you try to build a new life.

© 2009, Chicago Tribune.