Tax refunds can provide a useful windfall of cash that can be used to catch up bills, pay down debt, fund vacations, or build up your retirement accounts. Nearly everyone feels like they’re short of cash and could use the boost that tax refunds provide. If not used efficiently, this relief can be very short-lived.
Using a Tax Refund to Jumpstart Debt Payoffs
High levels of credit card debt create not only stress, but budget challenges. Monthly payments are high and debt reduction is at a trickle. It can feel like you are trying to fill up a bathtub with a spoon. Digging out of $40,000-$50,000 worth of debt can be both overwhelming and exhausting.
So while it may be tempting to use a tax refund to put out the fires that are burning the highest, that might not be the best long-term strategy. This time of year bill collectors step up credit collection efforts in order to get paid while you have a windfall coming in. Which do you pay first? Do you catch all the accounts up and return to making minimum payments? There is a myriad of options at your fingertips, but which will provide the long term solutions you are desperate to find.
Working with debt advisors can help you find the most efficient strategy for reducing debts most effectively. Even if you only earmark a percentage of your refund to debt reduction, you want to make the most of every dollar you contribute.
Whether credit card accounts are behind, or you are struggling to keep up with the monthly payments, leveraging catch up payments is always the best strategy. This will allow you to put debt reduction into overdrive, and eliminate debt faster. A tax refund is an opportunity to make a sizable dent in your debt strategy.
During the tax season debt collectors are well aware that millions are receiving refunds. They are anxious to get their piece of the pie, and have you pay them, as opposed to another creditor. This has the ability to put you in the driver’s seat of debt negotiation.
Having a debt agency like Strategic Consulting working on your behalf is viewed positively by debt collection agencies. They know you are serious about eliminating the debt and have the coaching that can help you become successful. This, combined with refund season, can result in aggressive settlement offers that might allow you to completely eliminate a debt through a reduced payment agreement. Even if you cannot accomplish a reduced payoff, the shorter-term and lower payments will allow you to finalize an agreement that will work in your favor.
High debt balances are typically carried on multiple credit cards and all may be suffering from late payments, high fees and high interest. You must decide which credit card companies are offering the best payoff solution and what offers give you the best bang for the buck.
Living a debt-free life may feel beyond your grasp when minimum payments are overwhelming. Let your tax refund jumpstart your debt elimination program by taking action today. This time of year you have more leverage and more negotiating power, allowing you to capture the best terms for a faster road to financial freedom.