It’s about that time of year when everyone starts getting their tax returns. Many eyes light up like an 8-year-old on Christmas morning with dreams of a tropical vacation, the newest greatest TV out there, or a summer wardrobe shopping spree. For some people, the idea of saving and paying off all debt is what dreams are made of. Which one should you choose?
I’d like to think you can choose them all. But depending on the size of your return, the amount of debt you have to pay off, and how your savings look, the thoughts of white sandy beaches and clear water may be more dream than reality.
First and foremost I recommend stashing a portion of your tax return (that you know you won’t miss) directly into your savings. Trust me – when you need money – it’s a much better feeling to have it then to borrow it.
Second, look at your outstanding bills and credit cards. If you have the extra money to pay off your debt, do so! If you are up to your ears with debt, pay down what you can. Try to get yourself as close to even as possible.
Finally, the fun stuff… See what you have left of your tax return and treat yourself to something that you want. If you have put some money away in case of an emergency and paid down your debt, you deserve to have a little fun. So maybe it’s not a new LED 3D TV or your shopping spree isn’t as lavish as you first dreamed, but at least now you’ve done what you’ve needed to do so that dream doesn’t turn into a possible financial nightmare later.