It’s that time of year when it seems like everyone you know will be excitedly filing their taxes and receiving loads of cash from the IRS. It’s tempting when you get a little extra money, especially if you’ve spent the year in debt or barely scraping by, to splurge and enjoy your refund. However, although fun, it isn’t exactly the wisest decision especially if you plan to get ahead of your debt at some point. Here are some ways to use your tax refund this year to get your finances in order.
Catch Up Past Due Accounts
Once you get behind on payments, it’s difficult to catch up unless you have enough money available to make at least two payments. Otherwise, interest payments and late fees can keep you behind and inevitably cost you more money. Further, late payments and past due accounts can negatively affect your credit rating and result in increased interest and fees in the future. If you get a tax refund this year, you may not be able to pay off all your debt, but there’s a chance you can use at least a part of your refund to catch up on any late or past due payments, which can end up saving you money in the long run.
Start a Savings Account
Recent data has revealed that 62 percent of Americans have less than $1,000 in savings. What’s even more worrisome is that 21 percent don’t have a savings account at all. With tragedies and emergencies being among the top causes of debt and bankruptcy, it’s important to have this fund available if you need it. If you don’t already have a savings account started, open one and get it going with your tax refund. Also, don’t forget to check around for special promotions for opening new accounts.
Make an Extra Payment
You can save quite a bit of money by using your tax refund to make an extra payment this month on your car loan or mortgage. Extra payments provide an opportunity to pay down on your debt faster and save money in interest payments. If you don’t have a car loan, it doesn’t hurt to pay a little more on other debts, especially those that usually only get the minimum monthly payment. You may not experience the benefits of making an extra payment right away, but in the end, it’ll be worth it.
There’s nothing wrong with treating yourself when you get your tax refund. However, if you set aside some of it to get your finances in order, you might struggle a little less the rest of the year. On the other hand, if your debt is out of control and bankruptcy is your only option, your lawyer can help you determine the best way to get your finances in order.
How do you plan on using your tax refund? Let us know in the comments and don’t forget to share this post with your friends and family online.