While you might be reserving your tax refund to find sold-out concert tickets, a night on the town, a new handbag, we have some tips for how to make the most out of your refund this year. (There’s still a place for that handbag, too…)
- Pay Down Debt – Unless it’s a mortgage, nothing will eat into your personal wealth like owing someone money with interest. With credit cards, car payments, hospital bills, tickets, and layaway, your purchases cost more. For example, if you have a credit card debt and you are paying 18% interest, you are paying nearly $2 extra for every $10 you spend… every month! If you have multiple debts, choose the one that has the highest interest rate to pay off first.
- Create an Emergency Fund – This is a financial cushion to prevent you from going into debt if you have an unexpected expense, such as a flat tire, speeding ticket, hospital bill or higher-than-normal light bill. You can also use this fund to survive if you are ever laid off. The suggested amount for an emergency fund is 3 months-worth of expenses. The tax refund is a great start to opening up a savings account or adding to it.
- Save for the Future – Create an itemized savings account to prepare for your next new car, an expensive vacation or a new set of dining room furniture. That way you can pay cash for your next big expense, instead of credit. (See point 1.)
- Buy Something Fun – There’s no reason to be serious about your entire refund. When you’ve boosted your savings and depleted your debt, save a small amount for a reward for you. Like, a new handbag . . .
If you need help filing your taxes this year, don’t waste part of your refund money paying for someone to help you. The United Way and Pensacola State College partner each year to provide FREE TAX FILING assistance. Click this link for more details.