Financial planning expert and LearnVest CEO Alexa von Tobel is here dishing out some excellent advice about how to use your tax refund to achieve financial stability.
Step 1: Use 10 Percent for Something Fun
First off, Alexa recommends taking the first 10 percent of your tax refund and setting it aside for something fun. She says doing this will make it more likely you will use the rest of your funds towards your financial goals.
Step 2: Pay Down Credit Card Debt
If you have credit card debt, Alexa recommends paying that off next. She says that you should pay off your credit cards in order of interest rate from highest to lowest.
Tip: Even if you pay off your complete balance, Alexa recommends that you should only close one credit card per year.
Step 3: Add to Your Freedom Fund
If you have any funds left over after you’ve gone through steps one and two, Alexa recommends putting it in your savings account, or as she refers to it, your “Freedom Fund.” Alexa recommends the following guidelines when it comes to your savings account. If you are single, she says you need three months of living expenses saved. That goes up to six months if you are married, and even more if you have a family.
Step 4: Accelerate Your Debt
If you have steps one through three covered, Alexa recommends “accelerating” your debt. If you have student loans or a mortgage, she recommends making an extra payment. She says that you should include a note with your payment asking your loan company to apply it to the principal.
How will you use these tips to improve your financial stability? Share below!