Daily Dupaco

Thursday, May 08, 2014

Pay down debt, stack up savings with your refund

If you've received a refund from Uncle Sam, you've probably thought of a few ways you could use that windfall.

It's no secret that many Americans use their tax refund to go shopping, often spending more than they normally would. In fact, some people have spent the money before it has arrived, says Marcie Winkelman, a Dupaco Money Makeover Artist and senior lending consultant at the JFK branch in Dubuque.

"A lot of people will take out a loan and say they'll pay it back when they get their tax refund," Winkelman says. "They have it spent before they received it."

This year, consider "spending" that refund differently. Allow that money to work for you by paying down debt, stacking up savings or doing a little of both.

Everyone's financial situation is unique, so a free Dupaco Money Makeover can help you determine the best use of your refund. During the one-on-one meeting, you can compare how much your refund would save you in loan interest to how much it would boost your earnings in saving dividends.

If you decide to pay off high-interest credit cards or other debt, ask Dupaco for a review of your monthly budget. Establish a plan that allows you to start paying yourself by saving at least some of the money you would have put toward credit card bills or loan payments.

"Make sure you have your budget in line so you don't have to borrow again or start using your credit card again," Winkelman says. "Otherwise, you didn’t save yourself any money."

Winkelman is always a fan of saving at least a portion of your tax refund to be prepared for the unexpected in life. A solid savings account is like a good security blanket, she says, helping you avoid relying on credit cards in the future.

If your financial priorities are met, it's OK to reward yourself with a portion of your refund, Winkelman advises.

"We're Americans, and we work hard for our money," she says. "Maybe you figure out a percentage that you can reward yourself with. There's a difference between spending it all on yourself and treating yourself within reason."

By Emily Kittle

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