Improve Credit Standing Using Tax Refund

How much tax refund did you receive last year

? What did you do with it? Looking back, do you think the course of action you took was worth it? Or are you regretting using the sum to buy that expensive watch you drooled over for months?

We all receive tax refund annually and we all wish to put it to good use. However, reality is, even when we think we are doing the right thing, chances are, were not. Sure, for the past couple of years, youve been using the sumplus any addition windfalls you haveto pay off some of your debts. But honestly, are you getting anywhere near that coveted financial freedom companies and financial experts so joyously talk about? Or are you just using the money as a temporary relief to keep yourself from totally sinking into the bottom of the quicksand of debt?

The thing is, no matter how many times you try to put off your debts using tax refund (or other windfalls for that matter); natural promptings would dictate that youll incur more as time goes by. For this reason alone, using that small amount with the sole goal of attaining a debt-free state seems impossible. And perhaps it is. But no one said that it cannot help you manage debt.

The key is to not look at the check as a relief, but as a weapon. Dont look at it as an excuse to spend more. Rather, look at it as a tool that you can use to destroy those monsters brought about by letters demanding that you pay up.

First thing you need to do is establish a safety net, or in this case, an emergency fund (given that you dont have one yet). At a bare minimum, everyone should have $1000 in cash stashed up somewhere in case of a real emergency. Make sure you always have this. These days, theres no telling when catastrophes or other mishaps would strike. The last thing you want is to find yourself somewhere cashless, without any ways of getting money for your needs.

Once youve done this (or if you already have an emergency fund set up), you need to find the best way to pay your debts. This is actually a great way to improve bad credit history. Take time to look at all the debts youve incurred to determine which one you should prioritizefigure out the balance and current interest rates of each, and then start your payment with the one that incurs the most interest. Your goal should be to eliminate as much debt as you can so as to minimize their effects to your financial capacity. If you have multiple debts that need addressing, take time to strategize carefully. Ask yourself these questions: Which among these, if settled, would give me the ability to pay off other debts? Which one can I pay later without incurring too much interest? Which will have the biggest impact on my credit rating?

Dont let your tax refund go to waste. Also, make sure you dont spend it even before its in your hands. Check credit report and strategizethat is, take time to plan the best course of action to take. You can get out of that debt hole. You can have a better life. You just need to learn to use your resources wisely and save where and when you can.

by: Amy

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