Manage your Tax Refund this Year
If you have received or will receive a tax refund from the IRS this year, what should you spend it on?Paying down debt, a vacation or invest it in the stock market?
Before investing, it is a good idea to make sure that you have an emergency fund and that you have paid down debt. And before you focus too much on investing or reducing debt, be sure to concentrate on building your cash security fund first, so that you can endure any rough events that occur in your life.
In our current economic crisis, most financial planners now recommend that individuals keep at least 6 months of their current income in cash (just a year ago the consensus was only 3 months of income in cash). If your cash fund is adequate, then, pay off any credit card debt first that you may have accrued over the years. It’s important to realize that this debt usually carries an interest rate (18 percent or more!) that is higher than what most investments have the potential of earning before taxes.
How will you spend your tax refund?
