If you received a tax refund this year, you might be tempted to spend the extra money instead of putting it away. In such unprecedented times, it’s probably best if you start looking for a way to support your financial future instead. Consider safekeeping your extra income or use it to pay off some debt.
Tax refunds are a great opportunity for you to make financial decisions that can help you on your debt-free journey. If you received a refund this past tax season, you should try using it to make progress towards your financial goals. Here are some clever ways for you to spend your tax refund.
Create an Emergency Fund
Last year proved to be unpredictable, to say the least. During the pandemic, it was critical to start an emergency fund. With extra income from your tax return you can prepare for the future; even if you can only save a small amount, it will make a difference later. The most important thing is that you maintain your basic essentials. Being in debt isn’t ideal, but you should not have to sacrifice your livelihood to pay off debt. Creating an emergency fund can help you as long as you can keep putting money in every month – no matter how much you contribute.
Related Article: Should I Use My Tax Refund to Pay Off Debt?
Avoid Making Unnecessary Purchases
When you have that extra money in your account, it can be very tempting to go on a shopping spree! However, viewing money as “extra” income is not the best way to use your tax refund. Beware of making unnecessary purchases. This can add up and impact your resources. Instead, invest in your financial future. 47% of Americans say they plan to save their refund. This might mean contributing to purchases that cut down long-term costs, such as home improvements to insulation or replacing inefficient lighting to lower your bills. This might not immediately impact your situation, but you can still reduce costs over time.
Pay off Credit Cards
If you’re struggling to pay minimum payments on time, you may find that making additional payments is the best way to use your tax refund. After all, late fees and interest charges do add up and can put you deeper into debt. Your minimum payment may also increase – which makes it even more difficult to pay off what you owe on credit cards. You should use any money from your tax refund that isn’t spent on essential items to make payments on your credit cards. It’s a clever idea to eliminate “hidden” fees that impact your financial stability.
Consider a Loan to Consolidate Debt
If you have lingering debts, you should use your tax refund to pay them off before making any other purchases. Even if you can only afford to pay off some of your debt, doing so will help you to avoid high-interest rates, saving you money in the long run. If your refund does not cover the full amount that you owe, you should take out a debt consolidation loan to cover the rest. A debt consolidation loan will provide a lower interest rate and help you get rid of your debt faster. We can help you find a loan option, no matter your monthly income, with only one application.
Fill out an application to find all of your options and then we’ll help you choose which option is right for you.
If you have questions about debt consolidation loans, speak to our team of knowledgeable professionals. Our compassionate loan matchmakers will find the best terms tailored to your unique situation, with fast approval and rates starting as low as 3.84% for amounts up to $100,000.
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