Lucky enough to receive a tax return? Congratulations! Before making any impulsive purchases, follow these five steps to make the most out of your return:
- Decrease Your High-Interest Debt: Once you’ve received your full tax return, start by reducing your debts. Making an extra payment on your high-interest loan is a great place to start. These loans cost the most in the long-run, so putting a portion of your return toward them will help you financially in the future.
- Pay Off Small Balances: Focus on any smaller outstanding debts you have. For example, paying off a $100 credit card debt will allow you to allocate additional monthly payments toward larger balances.
- Increase Your Savings: Shift your attention toward the future. Take 20% of the remaining amount of your return and invest it in your savings account. Having this emergency fund will help prepare you for unexpected expenses. Using your tax return to start this fund is a great place to start! Make a habit of increasing this account to cover three to six months of expenses.
- Purchase a Necessity: Use your return on extra expenses you might not have had the funds for. A few examples could include upgrading your vehicle, replacing old appliances or initiating home repairs.
- Do Something for Yourself: Lastly, give yourself a reward. Go on a weekend trip or buy something you’ve been wanting. The first five steps weren’t always that easy, so don’t be afraid to splurge a little and reward yourself for the hard work you have done all year.
Subject Matter Expert: Josh Moore – Northwest District Manager