We understand the temptation. From the moment you send in your taxes, your mind goes straight into thinking about how you want to spend that money.
Did you want to put that down payment on a new car? Are you thinking it’s time to upgrade your wardrobe? Are you going to sock it away for that family vacation?
Hey, you won’t receive any judgment from us! We completely get it. Yet, we’re here to advise you that maybe there is a better option for that money than buying more stuff, which is to put it towards your debt.
It’s certainly not the sexiest of options, or the most fun, but it can certainly save you a lot of heartache in the long run.
Here are three excellent reasons why you should put your tax refund towards your debt:
1) It Will Show You’re Serious About Your Debt
If you have debt, then you know that the quicker you pay it off, the less you’ll pay on it over time. The longer you have the debt, the more interest you’ll have to pay on it. The difference between paying it off early or not can be thousands of dollars in additional interest added. That means you’ll have more money in the long run.
If you have a lot of debt, it doesn’t make sense blowing your refund on a large vacation or adding to your debt by getting a new vehicle. Not to mention, paying a large chunk of it down can only help your credit score. Putting your refund towards your debt shows you’re becoming financially responsible.
2) Savings Might Get Spent
Putting money into your savings or rainy-day fund is always a good idea. You never want to go without an emergency fund stashed away. If you have no emergency savings, then it’s a decent option, but what you put into savings might be difficult NOT to spend. People have a difficult time saving money because the temptation is there to use it on frivolous things.
If you put it towards your debt, then it’s spent and a large chunk of your debt is gone, which is ultimately the best option. It might sting a little bit right now, but later on, you’ll save more money in the long run getting your debt paid off sooner.
3) There Are Better Ways to Save for a Vacation
One of the top ways people spend their refund is on a vacation. There’s no doubt that you deserve one after working hard all year, but there are just better ways to pay for it. A vacation is fleeting and won’t be something tangible to invest your money in. You might get a sick tan, but you’ll still have the same amount of debt as you did when you went in.
The best option is to pay off a chunk of debt and find another option for a vacation. Maybe take a shorter weekend trip somewhere until you have your debt paid off. Your vacation doesn’t have to be super expensive. Maybe pick up a small side job for a few months and sock away the money for a nice trip or save as much money as you can throughout the year
Either way, going on vacation while you have a ton of debt isn’t the most responsible decision someone can make. Adding to your already significant debt isn’t good either. The best thing you can do is buckle down until your debts are paid off. You’ll have a lot of time in the near future to enjoy debt-free living!