If you are getting a tax refund this year, take some time to reflect on how you can get the most bang for your buck. You can even approach it like a game. What is the smartest play? Which action will add the most to your wealth and cost the least in fees and interest?
PAY DOWN DEBT
Paying down debt frees up more spending money and improves your credit. Let’s say you have a smallish credit card bill and you’re paying minimum amounts. You could keep paying $30 a month for a minimum payment for the next several years, or you could use your refund to eliminate the debt and put $30 more into your pocket each month. Not to mention the interest you won’t be paying anymore.
There’s nothing quite like the feeling of paying off a debt. It can get addicting. With each debt you pay off, you can add that to payments on your next largest debt, and before you know it, you can make real progress toward becoming debt-free.
START AN EMERGENCY FUND
Having an emergency fund gives you something priceless — peace of mind. The chances of needing emergency money are quite high. Whether you’re faced with a smaller setback like a fender-bender or a large expense like an unexpected medical bill, you’ll be less stressed knowing you have at least some money in the bank.