How you should spend your tax refund
January 11th, 2016
This is the time of year when many people start anticipating the bonus they will receive from the federal government in the form of a tax refund. Many people use the tax refund to address items that their monthly budget can't handle, such as home improvement projects, major car repairs and pay down of their credit card or medical bills. These are all great uses of this lump sum of money provided that it actually solves the problem that you're seeking out to fix. For example, if your house needs new windows, it makes sense to spend the money to replace the windows...assuming that you can replace all of them! If you replace 7 out of the 10 windows and the other 3 windows are still leaking outside air, the savings to your monthly energy bill will be nominal, if not non-existent. If your car needs a new engine and you can only afford to replace half of the head gaskets, the engine still won't function the way it should. The same applies to unsecured debt. If you have $50,000.00 in credit card debt and your tax refund allows you to pay down $10,000.00 of the debt, it's certainly a good start. However, it doesn't solve the problem. You still will have a significant amount of unsecured debt that can't be paid and will continue to accrue interest. The balance you owe now may not change at all between now and next tax refund season without making additional major payments. You may want to consider your options in filing a bankruptcy to eliminate the debt altogether. In many situations, you may even be able to keep a portion (or the entirety) of the tax refund while still eliminating your unsecured debt. If you or someone you know would like to talk about their options, please contact our office to schedule a free first appointment at our downtown office.