If you are getting a tax refund this year, consider it an opportunity to set yourself up financially for the rest of 2016, and a a HUGE leap in becoming Debt Free! If you are joining along with me on the Soon-To-Be Debt Free journey, there are some specific things you should do with your tax refund
There are some very specific steps you should take when you get a decent lump sum of money. Follow them in the order below, working as far down the list as possible!
If you have any debts in collection, or are past due on any bills. Pays those first! You do not have to pay the balances in full, just make sure they all become current! If you have multiple past due balances, get them current in the following order:
- Anything to keep your house up and running
- Mortgage, Heat & Electricity
- Anything in collections
- regular bills
- medical bills
Dave Ramsey says you need $1,000 in an emergency fund. I personally feel better having a significantly higher balance. There are a lot of “emergencies” that could happen that $1,000 will not cover. See how in a matter of 10 days we unexpectedly spent over 2 grand, here! Sit down with your spouse and decide on an emergency fund figure that you are both comfortable with. Then- apply as much of your refund so that you can to get that set aside.
3) Tackle your debts!
Use your 2016 Soon-to-be Debt Free workbook and start paying down your debts! You should have already written down your priority list. Start at the top and keep applying your tax refund until you either 1) run out of money or 2) run out of debts to pay off!
If you’ve worked your way through steps 1, 2 and 3 and still have money from your tax refund left over. 1st – CONGRATULATIONS you are debt free!! 2nd- start building your savings account. Throw the remainder of your tax refund into a savings account until you reach enough money to keep your family afloat for at least 6 months….if you were to lose your job.
You’ve got this!! Just make sure you think of your refund as money that can work FOR your family. Do not go shopping, or “blow” it. Use it to set you and your family up for a successful 2015 and beyond!