Have you tried this smart way to use your tax refund? The IRS reports that the average American receives a refund of around $2,800!! So, when tax season rolls around, many Americans are thrilled to get their own “bonus.”
If you are one of those who receives a windfall each year, make sure you use it wisely. As much as blowing it might be, that is not the best answer. Make sure you are smart with that money.
If you are in debt, you should instantly apply the money towards those bills. However, if you are not in debt, there is another thing you can do with it. This will actually save you money on your monthly budget. How
Pay your bills in advance.
WHICH BILLS TO PAY?
When your tax refund comes in, don’t just blow it. Take a look at your budget to figure out which bills might be able to be paid in advance.
To start, make a list of all of your monthly bills. You can look at your budget as a guide. Determine which bills you might be able to be paid in advance. From there, list them in the order of importance, the payee and the monthly amount (or average if not a fixed payment).
- First list your debts.
- Next, list your utilities, or bills you need to have to live (i.e. water)
- The last monthly bills to consider will be your wants, such as cable or satellite television (these would be only those items you could pay in advance and it might really help your overall monthly budget).
If you added debts to your list, those need to be your top priority. Pay the one you owe the least amount to first and work up from there. You’ve now freed up income in your budget, which you can use to pay down the remaining debts!
Once all debts have been paid, you may have money left over from your tax refund. Now, look at the bills you pay each moth as you listed above.
PAY YOUR BILLS IN ADVANCE
Now that your debts are taken care of, it is time to pay your bills in advance. Start by calling the companies listed in steps 2 and 3 above. Ask them if they allow you to pay your bills in advance. Add those companies to your pay early list and do not worry about the others.
Next, make a list of the bills you will pay in advance. Start by listing out the one with the highest monthly payment at the top. The idea is to get out from underneath a large payment, in order or to free up more income each month.
Let me give you a simple example of how this might look:
Your tax refund is $3,000. You have made phone calls and have determined you can pay the following monthly bills in advance:
Electricity – $125 monthly
Water – $46 monthly
Trash – $12 monthly
Cell Phone – $90 monthly
Cable – $78 monthly
That is a total of $351 in monthly payments.
If all companies will allow you to pre-pay your bills, you would take each bill and multiply it by 12 to determine the annual cost. It might look like this:
Electricity – $1500
Water – $552
Trash – $144
Cell Phone – $1080
Cable – $936
Send in a payment to your electric company for $1500, water company for $552 and trash company for $144. That leaves $804 left to pre-pay on one of your bills. You can apply it to either of the final remaining bills.
Now, you’ve saved more than $300 on your monthly budget!!
When we did this, we found out that we there no issues with paying bills in advance. And, if we happened to move, they would issue us a refund for any overpayment. We even found out that we received one month’s worth of free trash service – just by paying our bills early!
Don’t blow your tax refund this year, use it to make life for the next year easier! It has been such a blessing to our family to use this method, and each year we look forward to eliminating as much of our monthly budget as possible, just by using our tax refund and making it work for us!
TIP: If you’re not sure what you spend yearly on your electric and or water/sewer, you can call down and ask them what you used from January – December of the last year. This should give you a pretty good estimate of what you will use. I always add 10% to that number when making my estimations on what amount to put as credit on my account, and it has worked well for us each year.
