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.”
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. (CESI) is a non-profit service provider of comprehensive personal financial education and solutions for all life stages and for all of life’s milestones. Our goal is enhanced economic security for everyone we serve.
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