Stretching Your Tax Dollar$
When your tax refund arrives whether by check or electronic deposit take a breath (Pause). Do Absolutely Nothing!! Give yourself 24-48 hours to enjoy having additional funds in your possession. After your self-imposed restriction start thinking about (Ponder) the mistakes you made last year and where you would like to be financially this year using the funds you just received. How did you recover from the financial mistakes of last year? If you did not recover, what is your plan to avoid those mistakes this year? What does financial success look like to you? Create a solid Plan of action that includes definitive numbers and not just labels e.g. $100 for VISA versus “pay off bills”.
Create a budget that prioritizes your present needs and also puts into consideration your future needs. Your Plan should also allow you to save or add to your emergency fund. An emergency fund is typically three months of your household expenses but if that amount is out of reach strive to have one month of pay or the equivalent of last year’s least expensive emergency whichever is more manageable.
Using a portion of your tax refund to eliminate at least one debt is financially prudent. Some people choose to eliminate their debt based on interest rates, others by the size of the debt, while some may choose to eliminate the debt which has the most or least emotional impact on their life. Decide which debt is best to be eliminated first, how you decide is up to you. Below are four practical steps to eliminating debt:
- Create a debt elimination plan
- Factor debt payments into your budget
- Ask creditors for a lower interest rate
- Pay more than the minimum balance
Be your own financial advisor now is the time to take control of your finances. Treat tax season like a one-time raise the money is hard-earned it is not free.