By Michael Barnhardt, District Manager, Marine Credit Union
In just a few weeks (or less), approximately 11 million Americans will be receiving a tax refund. The average tax refund received in 2019 was just shy of $3,000. Like many, you may be planning how best to spend your refund. We have some advice on how to leverage your tax refund this season to create meaningful advancements in your financial journey.
While each of us has a unique financial journey, the basic needs for stability remain for all. Before dreaming about vacation plans, an upgrade to your car or that new item that you “need” oh so bad, let’s look at smart financial planning that is applicable to all:
- An emergency savings account should be in place. – Each family should have an emergency savings account with a minimum of one month’s worth of take-home income set aside. These funds are meant for the unexpected such as major medical, major appliance repair or a major car repair and should not be touched outside of the events we cannot plan for.
- Debt Reduction – Focus on your highest interest debt as well as your smallest balance debt. When paying off each debt, take the amount of that monthly payment you have eliminated and add it to the next debt in line to pay. You will quickly find yourself eliminating debts as you aggressively reduce balances through large principal reductions. Your tax refund is a great way to eliminate a few of the smaller debts before you even begin your debt reduction plan.
- Maintenance – The heaviest expenses come from neglecting the typical maintenance needs of our automobiles and appliances. After your emergency savings is built and debt reduction plan in place, leverage your tax refund to address and budget the maintenance needs of your assets: automobiles, homes and recreational vehicles. Failure to budget has you reaching to the emergency savings when a major repair is needed, for what simply would have been avoided through focused discipline of timely maintenance.
- If you find yourself advanced on your financial journey and receiving a tax refund with an emergency savings built, debt eliminated and all maintenance up to date, find ways of giving back in your community. Is there a charity that speaks to your heart that your financial resources can best serve? Our communities are dependent upon financial savvy leaders to care for the less fortunate and build a brighter future.
We are all on financial journeys that will provide us different opportunities. As Dave Ramsey so eloquently put it, “You must gain control over your money, or the lack of it will forever control you.”