A savings account is essential in order to successfully pay off credit card debt. Even if you have already tracked your expenses and worked up a detailed budget, you are more likely to fail when emergencies arise without a savings account. Life is unpredictable and includes surprise expenses like car repairs, home repairs and even invitations to weddings. These surprise expenses can be a challenge when managing a budget. If you do not have savings funds available, what are the alternatives? You may be tempted to use a credit card you’ve been working to pay off, but that will raise the balance. An even worse option you might consider is to allow a utility or some other bill to go unpaid to cover the expense. A budget without savings is not beneficial due to the emergencies that arise.
Instead of including savings into their budgets, many people use their tax returns to catch up on various bills or expenses that accumulate throughout the year. If you are going to use your tax return to supplement your budget, a better option is to put your return in a savings account so that you can “play from in front”. A savings account will allow you to pay an unexpected bill or have car or home maintenance completed when needed, rather than deferred to grow into a bigger problem down the road. Also, the feeling of financial security you will get is invaluable. This will provide an opportunity to stop borrowing money on credit cards.
If you receive a large tax return, you need to have a plan for that money. Consider using a tax return to improve a budget with low cash flow. A tax return of $3000 averages $250 a month throughout the year. A $5000 tax return equals an additional monthly income of $416. What could you do with $250 or $416 additional each month? Could it make your car payment or student loan payments? Even though your tax return may not be enough to pay off your car, it may be enough to make your car payment disappear for a year. Paying off high interest credit card debt must be a high priority. Apprisen can help develop a strategy to save and reduce debt. If you would like to speak to a Financial Services Specialist call 800-355-2227 or visit our website apprisen.com to schedule an appointment.