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Debt Free

We’re about to wrap up another tax season and for most of us that means “refund.” In my pre-debt-free days, I would have “spent” our tax refund before the check was in the mail. A new TV, a vacation, furniture…it would have been used up in an instant without a second thought.

Most people seem to view their tax refund as “extra” money. But the government isn’t sending you a bonus check. This money is part of your annual income. It was withheld from your paychecks to pay your taxes. If too much was withheld, you get a refund. And just like the rest of your income, you need to make a plan for how to use it.

According to the IRS, the average tax refund in 2010 was $3,003. Don’t blow this chance to make a dramatic impact on your financial future!


There are only 4 worthwhile ways to use this large sum of money.

Save It! Pay Off Debt! Spend It (wisely)! Give It!


Save It!

USA Today reports that 55% of Americans couldn’t live for even 3 months without a paycheck. 17% couldn’t make it 1 week! The majority of people in our country have virtually no buffer between them and life. If the unexpected occurs, they are literally in a financial crisis.

If you don’t have an Emergency Fund, this is the perfect opportunity to start one. If you are in debt, you should save up $1,000 as a starter emergency fund. Once you have paid off all your debt, other than your mortgage, you need to save up enough to cover 3-6 months of your household expenses. This emergency fund gives you some cushion for the inevitable whammies that life will throw at you.


Pay off Debt!

The lending industry’s motto is “there’s a sucker born every minute.” If you are in debt, you need to accept the reality that you are getting ripped off. Beyond the financial rip-off, debt literally sucks the fun out of life. USA Today says that 63% of Americans spend 1-3 hours per day worrying about debt. That’s up to 1,095 hours per year spent in fret over debt! There is no excuse for accepting debt and money worries as a way of life.

Your refund check can be one of the best ways to pay off debt. You may be able to completely knock out several of your smallest debts in one swoop, and accelerate your debt-freedom by months or years! Stop making excuses! Unless you really love struggling financially, or giving your hard-earned money to the bank, you owe it to yourself to make a change!


Spend It (wisely)!

There are circumstances where it might make sense to spend your refund. If you are truly in need of a vehicle, your refund might allow you to make a 100% cash purchase of a reliable car. There may be some necessary home improvements you could make, such as replacing an A/C unit, mold removal, or a repairing a leaky roof.

The key to spending wisely is to be very honest with yourself about the purchase. Is it a NEED or a WANT? Think about your long-term financial goals, and make sure the purchase truly is more important than saving for an emergency fund or paying off your debt.


Give It!

Just like the rest of your income, you should plan to give at least 10% to your local church, another ministry or a charity that is close to your heart. Giving to others in need is one of the best ways to increase your ability to be content and thankful for the good things in your life.


Whatever you do…Don’t waste it!

This is your chance to get a jump-start toward true financial freedom in 2011. Use this chance to make a decision about your priorities. What is more important to you…a new TV, a vacation, some new toy? Or is it more important to literally change your family tree by finally taking control of your money and your life? Make a change for good! I know you can do it!


Yours In Freedom,

Clint


Join the conversation…How do you plan to use your tax refund? Will you pay off debt, save, spend, or give??? Leave a comment and let us know!