How To Get Your Kids To Start Saving
April is here and Canadians are hustling through their last minute tax filings. After the paper work is in, the ‘i’s are dotted and the ‘t’s are crossed, hopefully you’ve got a tax return on the way. If you do, here are a few great tips for what to do with that extra cash, and how it applies to your debt situation.
If you’re in debt and expecting a tax return, there are any number of ways to allocate the cash. Some are fun, some are functional, but all of them should put you on the road to financial freedom – provided you stay strong and get serious about your debt.
For all of these examples, we’re going to assume you’re about to get a $1000 tax return. We’ll keep the numbers round and the process simple, so you can see the way we recommend thinking about these savings tips.
1 – 50/50
Take $500 and immediately transfer it to make a debt payment. That felt good, right? Now you’ve still got some of that tax return to play with, invest in your future or tackle your everyday expenses with. If you’re like most of us, and you forget about the tax-return money that might come each year, it’s important to allocate the debt money as soon as the cash hits your account, so you don’t get used to having all that extra money around.
This strategy is easy because you’ve got lots leftover for yourself, while still feeling responsible about how you used the first half of the money.
2 – All-in, Baby
That’s right – take the entire $1000 (as soon as it’s in your hands) and fire it straight at your debt. Big moves like that will be important steps towards getting out of debt. Would you like to be $1000 closer to paying off your credit card? It could happen that strategy. It can be tough to do, but a month later you’ll be grateful.
3 – None
Wait wait wait… are we saying that you shouldn’t put any of your tax return towards debt payments?! That’s insane, right? Well… only if you don’t do something with the other part of your budget. Yep – sometimes you just need to have some fun with tax return money. And the best way to do that is when you have already made your debt payments for the month.
If you’re good to go on April’s payment, and you know May isn’t going to be an issue, then by all means put your tax refund wherever you like. Keep in mind, if you’re using tax money for the fun stuff, then you’re going to free up your usual budget for some more responsible moves.
As you can see, it’s important to be conscious about where your tax money is going. Rather than the ‘pay some here, some there, and leave some for fun’ approach, this is a way of having a plan against debt and executing it – which is a powerful start to clearing your debt load.
These strategies go for any type of financial windfall, bonus or cash-injection. Keep them in mind for when you’re lucky enough to get a little bit extra cash.
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