If you are like most people, you expect to have a good time spending your tax return money. Your parents or friends who are savers may advise you to use the tax return money to save for retirement or pay off debt. Even if you feel overwhelmed with debt and dealing with debt collectors, you shouldn’t spend all of your extra money to pay off credit card debt. With debt counseling, you could find ways to fulfill your obligations to creditors while also protecting your family in case of financial emergencies. Debt counseling can give you the tools you need to know how to handle cash windfalls in the future such as an inheritance or refund. According to a story by Credit.com, a cash windfall can disappear quickly if you don’t handle it well.

Take a moment to think

Before spending a windfall such as a tax refund check, pause and think about your financial situation. A trained credit counselor can help you set up a budget so you know how much money you have coming in and how much is going out each month. You can identify the best place to put your tax refund money whether it’s in a retirement savings account or emergency savings account. You may have an immediate need to pay your rent or mortgage. You can learn to differentiate between things that are urgent and important and things that are important to you, but not very urgent.

Tackle the debt

According to Credit.com, it’s a good idea to tackle your high-interest rate credit cards. Instead of using all of your tax refund to pay off a single creditor, consider enrolling in a Debt Management Plan. By consolidating your debt, you will only have one monthly debt payment to make. The real advantage of debt consolidation is the fact that experienced credit counselors will negotiate the interest rate on your various credit cards. With a lower rate, you’ll owe less money to your creditors.

Plan for the future

Once you have a solid budget that includes your monthly debt repayment, you can look for any ways to cut spending so you can also save for retirement and other financial goals. You can tweak bills that seem like fixed expenses such as the utility and water bills by encouraging everyone in the family to turn off the lights, conserve water and adjust the temperature in the home. If you can reduce your cable or phone bill by $50 a month, that’s $50 to put into a Roth IRA or emergency savings fund.

Do you want to know more about debt and how you can make smart financial decisions now that will help you secure a more prosperous financial future? Sign up for our newsletter for monthly money tips.

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