Wondering what to do with your tax refund? Take the lump sum payment and seize this
opportunity to establish an emergency fund.
This is a smart investment move for your financial
future. The ideal emergency fund has
three to six months of living expenses in it so that you have cash to cover
expenses when unexpected events occur. Without
an emergency fund, you’d have to resort to using credit cards or taking out a
loan to cover the costs of unexpected expenses.
When you use credit, you could end up owing tremendously more due to the
interest accrued. This certainly
affects your ability to save money and keeps you in the debt cycle.
If you’ve already contributed your tax return to your
emergency fund, make sure you maintain it (not drain it!) The key to funding your emergency fund is
controlling your spending. Take an
inventory of your cash spending by tracking all expenses for 30 days. Look for creative ways to save by cutting
back on expenses for unnecessary items like dining out, shopping sprees,
etc. Set a goal to contribute the set
amount of money that you are saving each month to your emergency fund.