Start or add it to your emergency fund.
You should do this first if you don’t have at least $1000 in your emergency fund. One great place to put it is in a high interest savings account, some of which are several times higher than many brick and mortar banks.
How can you save additional money for an emergency fund?
Suze Orman caused a bit of a stir by advising people to pay minimums on their credit cards until they have eight months saved. The point taken for me is that socking away some money in these uncertain times can be a wise move.
Pay down your credit card debt.
Congrats if you have some money leftover from #1 to put towards paying down your debt. This is a step that can make you feel better as your debt shrinks. Depending on the size of your bonus you can completely eliminate your credit debt out take a chuck out of it.
You can tackle it one of two ways:
- 1. Go after the small debts and feel great about knocking them out completely. This debt snowball method could give you a psychological incentive to continue. Dave Ramsey notes that many problems can be overcome by psychology.
- 2. Put it towards the highest interest debt and gain a financial advantage. If you’re looking at a strictly numbers standpoint, this is the logical choice.
Choose a method that will work best for you.
How do you do get rid of debt?
- Stop using credit cards. Hide them or perform a plasticomy.
- Discover the exact amount of debt you’re in. You can’t come up with a plan until you know what you owe.
- Work to see if you can lower your interest rates. If you can’t, you may consider choosing a 0% card to transfer your balance. Balance transfers are a temporary fix and do not address the root problem.
- Control your spending and write a simple budget.
- Automate your bills and put aside some money for savings.
Do you have any tips or plans for your tax refund?
Photo Credit: Crystl
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