WalletRehab - Ways to save money

Right now, you’re probably waiting for your income tax refund in the mail. Some of you may have already decided on how you’re going to spend your income tax, but I’m betting that most of you haven’t yet. Heck, I’m hoping you haven’t spent it yet. Even if you have already decided on how you’re going to spend it, you can always change your mind.

Let me say that again. You can ALWAYS change your mind.

Your refund is a paycheck.

Almost every personal finance guy out there says that you need to pay yourself first. This is normally said about your paycheck, but what they don’t say is that your income tax refund is just another delayed paycheck? It is not a bonus from the government for being a good law-abiding citizen. Your tax refund is not a gift from Santa Claus for your years of being on the Nice list. This is your paycheck in another shape. Never forget it.

Save it for an emergency

Before you spend a cent of that refund, of that misplaced paycheck of yours that the government has happened to find, you should take 10% and put it in a savings account somewhere. I strongly urge you to use that 10% as the beginning (or an addition to) of your Emergency fund. You never know when a car accident will leave you scrambling for cash. Have an emergency fund. Start it today with your tax refund. You’ll sleep better for it.

Treat yourself. You deserve it.

Then, I would take another 10% of that check, and treat yourself. It is very difficult to receive money and not spend it on something. The only way to manage this strange, awkward, “money burning a hole in my pocket” feeling is Controlled Spending. Budget out a portion of your income tax refund, say 10%, and spend it. Reward yourself for being responsible with the other 80%.

Pay off some debt.

And the rest of it? If you have high interest debt, from credit cards or auto loans, pay that. The average household in America with at least one credit card has $9,200 in credit card debt. Chances are, you’re tax refund is less than that $9,200. Use all of your 80% to pay down your debt. You’ll feel better about it, and the money saved from the interest you’ve avoided paying will help you sleep at night.

I’ve found paying off debt makes my pillow fluffier. I think you will too.

And if you’re debt free? Congratulations! Time to go stop off at another blog to learn about investing it!