What to do with your Tax Refund?

20 01 2011

HAPPY NEW YEAR!

Last year, taxpayers received an average refund of about $3,000, which was a 5% increase from the previous year. If that trend continues, we can expect an average refund of $3,150 this year. When people receive this boost of money they can be very quick to spend it on frivolous things such as a new TV, a new computer, a video console system or even a new car!

Instead of doing this, I have a far more practical suggestion, for those who want to get serious about their money.

If you receive about the average refund of $3,000, then the first thing you should do is pay yourself! A good goal is to put about 30% of your refund into a savings account. In this case that would amount to $1,000. That is a great start for an emergency fund.

The second thing that you should do is to pay off your credit cards!! In 2010 there was $852.6 billion is US revolving debt with about 54 million household that carried credit card debt. By dividing those two numbers, we find that on average, there was $15,788 credit card debt per household.

So once again, if you are in that average, the remainder of your tax refund should most definitely be used to start paying down that enormous amount of debt you are carrying around on your credit card! Although this won’t pay it off completely, it will be a good start and will help get the ball rolling.

And after that point, stop using the credit cards, shift gears by getting your family on a budget, and continue to pay off that debt!

If the idea of getting on a budget is overwhelming, let me know if you would like me to help you set it up. There is no reason your money should control and suffocate you, you are in charge!

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