#happylife: What financial experts say you should do with your tax return
SPOKANE, Wash. — If you are waiting to receive your tax refund, you are probably already thinking of all the ways you’d like to spend it. Financial experts warn though, better to avoid big splurges and save the money for a rainy day.
There might be other things in your household budget you should be addressing. For instance, do you have an emergency fund? If not, you aren’t alone; 41% of Americans don’t have $400 put away in an easily accessible account to cover bills in an emergency situation like a sudden loss of job or injury.
“Here’s the deal, financial advisers recommend you have 3-6 months of your whole household obligations in a savings account that you can access in case of a catastrophic event,” explained Sherry Wallis, a community development officer for STCU.
Use your tax refund to get it started. If you didn’t get one though or would like to continue once you have that head start, Wallis says take time to look over your spending habits for things to cut out. Perhaps you go out to lunch a few days a week. Instead, bag your lunch and add the money to your emergency account. If you don’t think that’s possible, set up automatic deposits.
If setting up an emergency account is too out of reach, use your refund to get ahead for the year by putting the money toward credit card debt you’ve accumulated.
Wallis says there are a few ways you can approach chipping away at debt. If you are someone who needs more instant gratification, start with the credit card that has the lowest balance first. You’ll see results quicker. If you are a numbers geek and hate that card with the highest interest rate, start there. Put as much money as you can toward one card, and watch the balance dwindle.
“Here’s how it works. You need to stop using the credit cards! You have to pay at least the minimum because if you don’t and you don’t pay them on time it will affect your credit score and that can have long term affects,” she shared.
Something else to remember if you are trying to really bring down one balance, don’t forget about your other cards. You’ve got to pay at least the minimum on those every month too. If you don’t, you could hurt your credit score.
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