So, over the next few days I'll be making some suggestions. What you do with it is of course ultimately up to you, but in our household we feel that tax refund money is like "found money"...money you didn't realize you had. So put it toward a noble purpose.
1. Pay off/down credit cards. If you don't owe any money at all on any credit cards, have a super day and I'll see you tomorrow! If you owe any money at all on credit cards, that needs to be your NUMBER 1 PRIORITY to get that debt taken care of. The main reason the middle class in America is shrinking at the alarming rate it is is due to credit card debt.
Below are some statistics from http://www.creditcards.com
- Average credit card debt per household with credit card debt: $14,750*
- 609.8 million credit cards held by U.S. consumers. (Source: "The Survey of Consumer Payment Choice," Federal Reserve Bank of Boston, January 2010)
- Average number of credit cards held by cardholders: 3.5, as of year-end 2008 (Source: "The Survey of Consumer Payment Choice," Federal Reserve Bank of Boston, January 2010)
- Average APR on new credit card offer: 14.73 percent (Source: CreditCards.com Weekly Rate Report, Feb. 9, 2011.)
- Average APR on credit card with a balance on it: 13.67 percent, as of November 2010 (Source: Federal Reserve's G.19 report on consumer credit, November 2010)
- Total U.S. revolving debt (98 percent of which is made up of credit card debt): $796.5 billion, as of November 2010 (Source: Federal Reserve's G.19 report on consumer credit, March 2010)
- Total U.S. consumer debt: $2.40 trillion, as of June 2010(Source: Federal Reserve's G.19 report on consumer credit, November 2010)
- U.S. credit card 60-day delinquency rate: 3.23 percent. (Source: Fitch Ratings, January 2011)
- If you owe more than your refund is, pay on the card(s) with the highest interest rate first.
- Don't use a credit card to pay for things you consume quickly, such as meals and vacations, if you can't afford to pay off your monthly bill in full in a month or two. There's no faster way to fall into debt. Instead, put aside some cash each month for these items so you can pay the bill in full. If there's something you really want, but it's expensive, save for it over a period of weeks or months before charging it so that you can pay the balance when it's due and avoid interest charges. Then when you purchase that item, you will enjoy it that much more!
- Get a handle on your spending. Most people spend thousands of dollars without much thought to what they're buying. Write down everything you spend for a month, cut back on things you don't need, and start saving the money left over or use it to reduce your debt more quickly.
- Don't fall into the minimum trap. If you just pay the minimum due on credit-card bills, you'll barely cover the interest you owe, to say nothing of the principal. It will take you years to pay off your balance, and potentially you'll end up spending thousands of dollars more than the original amount you charged.
Live in Victory! Lynette