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Treating yourself is fun, but paying off debt, boosting savings with refund check is better
Raleigh, NC – March, 2011 – There’s no shame in admitting getting a check in the mail is fun. And this year, about 75 percent of Americans will find a refund check from the IRS in the mail. Even better, the average refund will be about $3000 -- a slight increase from 2009. But before dreaming of all the fun things that newfound wealth can buy, such as a new TV, vacation or furniture, there’s a word of caution. Paying off debt or building up savings can save a whole lot of trouble in the future.
“Folks need to remember their tax refund isn’t a gift or a prize; it’s their money. They worked hard for it and it’s important to be smart with it,” says Neil Ellington, executive vice president of CESI Solutions, a North Carolina nonprofit agency committed to debt-free living. “While we all need some fun in our lives and so a small treat may be fine, it’s better in the long run to pay off debt and build up savings.”
Consider:
Besides paying off debt, it’s also important to build up an emergency fund. While savings accounts are paying a miserable 0.1 percent interest rate, a good rule of thumb is to have several months of income set aside.
“I advise clients to follow the rule of thirds with a cash windfall such as a tax refund,” adds Ellington. “One third to debt payment, one third to savings, and one third towards a splurge or something you have been saving for.”
Filed Under: News and Press
Consumer Education Services, Inc. empowers people to overcome their financial challenges and lead financially-healthy lives.
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