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Refunds, raises and bonuses: use them to change your financial situation

During the first quarter of the year is when most people receive raises, bonuses or tax refunds. Leading many people to question of what they should do with this windfall of money. How you use this money has a dramatic impact on your financial future.
What are the best moves to make with extra money like refunds or bonuses?
One of the best moves to make if you have debts is to look to pay off or reduce the balances on your highest interest rate loans and credit cards. When you payoff debts you will free up extra money in your monthly budget and save by paying less interest.
What if you don’t have any debts?
Then focus on the highest priority saving issue you might have which could be building an emergency fund, saving for education or increasing your retirement savings fund. All three of these moves will make a significant long term impact on your financial situation.
Are there any other savings priorities to consider when getting a lump sum of money?
This might be a time to save for an upcoming purchase or perhaps even for the holidays or even a vacation if you don’t already have funds saved for those expenses. Any windfall of money that can be used for a planned purchase avoids building debt will have long term benefits.
What is a mistake to avoid with the use of bonuses and tax refunds?
Spending it on an expense that causes you so spend even more. Sometimes, when people get an unexpected windfall of money, they end up overspending on an unplanned purchases such as a house remodel or extravagant vacation. This overspending can lead to increased debt or depleted savings which are both unfortunate outcomes.
How can people ensure they don’t squander their raise?
One of the best financial moves to make is to start automatically saving at least 50% of your raise in separate account. Use the remaining amount to accelerate any type of debt that you have outstanding. If you continue to save at least 50% of your raise, within a few short years you will be saving a considerable amount of money from each paycheck and also allowing yourself to spend a little more too.
What would be appropriate places save part of your raise?
The very first priority should be retirement savings, if you are not saving at least 10%, use at least half of your raise amount to get closer to 10%. If you are already at the maximum contribution amount, turn your attention to longer term needs such as education funding or building emergency funds. Finally, use the savings for planned purchases or to reward yourself.

Posted: 2/28/2020 with 0 comments

Categories: Debt Reduction, Money Matters, Planning, Retirement, Saving, Spending

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