April is tax time, which brings
about numerous ads for ‘Tax Refund sales.’
Whether it’s a tax refund, inheritance check, or capital credit check, whenever
unplanned money arrives it can be tempting to quickly spend it. However, this is an excellent time to
evaluate where you can most strategically use that money to benefit yourself
and your family the most.
First, make sure that you have
money saved for potential emergency expenses.
According to a 2016 GOBankingRates survey, 69% of all adults in the US
have less than $1,000 in savings, with half of those adults not having any
savings. In the event that a vehicle
needs a new engine, the refrigerator goes out, the hot water heater needs
repaired, or you end up needing to pay your $500 insurance deductible for
medical expenses, where does that money come from? Now is a great time to lock away $500 to
$1,000 in an ‘emergency fund’ for potential emergency or ‘occasional’ expenses
that need money set aside for them.
Secondly, evaluate any deb Do you have any unpaid bills that you
have gotten behind on, or debts that need paid?
Choose which debts are smallest and knock those off first. That will provide motivation for continuing to
address any remaining debt. If you have
two debts of similar amounts, choose the one with the higher interest rate. Now is the time to pay off those credit cards
and cut them up! In my household, we
plan to put a portion of any additional income we receive towards our home mortgage
with the goal of paying our house off early, which will save us thousands of
dollars in interest expenses over the course of the loan.
ts you
have.
Next, put money towards a 3 to 6-month
emergency fund – If you were to lose your job or had an injury or medical expense
that prohibited you from working, would you be able to cover your monthly
expenses? Make sure to budget enough in
an ‘emergency fund’ to cover things like housing, utilities, groceries, fuel, any
loan payments you have, etc. Putting any
additional money towards an emergency fund is a wise option that can give incredible
peace of mind in the months to come and help prevent the temptation of using
high-interest credit cards to cover those expenses.
If you do decide to spend a portion
of the money from a tax refund, inheritance, or capital credit check, think of
what upcoming expenses you may have this summer and spend the money on those
expenses. Expenses such as daycare while
school is out, a child’s summer camp expenses, graduation and wedding gifts, back
to school supplies, etc. will be here soon.
When tax refund checks arrive in
the mail, the temptation can be high to take advantage of those ‘tax refund
sales.’ However, ensuring you have at
least $1,000 in the bank, that debts are paid down, and that you have a 3 to 6-month
emergency fund in place will have a far greater impact in the long term.
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