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Step 1
First, pay off your credit card bills. A lot of us might think that it's better to just put all of the money into savings. But by paying off credit card bills, you can avoid paying interest every month. This leads to more money for you in the long run.
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Step 2
If you can pay off a car note, do that also. It's the same idea as the credit card bills. No monthly payment means no extra interest.
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Step 3
A mortgage broker once advised me to do the following when I have some extra money: pay an extra payment on my home mortgage loan. This takes a lot of discipline because the inclination is to use the money for other things. But by paying an extra payment each year, you are reducing your interest rate for the year.
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Step 4
Once you have decided which of the following steps to do (or all if you have the money!), then it's time to save. A good rule of thumb is to have at least 6 months of an emergency fund on hand. That means having enough money to continue life as usual if you were not able to continue working. This is sometimes difficult to do, but with some hard work it can avoid the need for credit card use in the future.
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Step 5
What about a little splurge? Hey life isn't all business, we need some fun too! Set aside an amount that will be used for something you have been really wanting! Whether it be an LCD t.v., vacation or a handbag for you (or your wife:) After all, you've been responsible with your money choices so reward yourself!
Comments
From-the-Heart said
on 2/3/2009 Great tips on what to do with your tax refund!