Income Tax Refund: Opportunity Knocks

This is tax filing season.  We have started gathering our papers for our accountant.  The income tax refund you receive is an “opportunity.”  What kind of opportunity?  That is up to you.  There are hundreds of ways to spend this money.  Below are some suggestions on wise ways to use your “opportunity” money:

1) Fund Your Emergency Fund.  One thing I hope you take from the current job market is to be prepare for the unexpected.  Having an emergency fund also protects you against using your credit cards for unexpected expenses.  Appliances break down.  Cars need repair.  Having an emergency fund can give you peace of mind.  I recommend a $1000 minimum for your emergency fund. 

Pay Down Outstanding Debt.  If you have a large debt load, it makes sense to apportion some of your refund to attack this.  Debt keeps you from enjoying life.  It robs you of sleep.  It puts strain on relationships.  Making a dent in some of your debt is a good idea. 

Have Fun (within reason).  You know the saying all work and no play.  It’s okay to designate some of your refund for some fun for yourself and family.  I recommend that your  fun money be less than 25% of your refund amount.  Oftentimes families allow having fun be there biggest priority with a tax refund check.  It is important that you have your priorities in order when spending this money.

Additional Tip:  Don’t spend it before you get it!  Folks make a couple errors when they do this.  First of all, you might not get the amount back that you spent.  This just adds more to your total debt.  Secondly, the unexpected can happen while you’re check is “in the mail.”  An urgent repair can pop up and you’ve already spent the check before it arrives.  Wait until the money is in your account before you spend the first dime. 

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