How to Make the Most of Your Tax Refund (Before You Blow It All)

Getting a tax refund can feel like receiving a nicewindfallof cash.

Evaluate your financial situation and goals, and make purchases that align with your long-term objectives.

A good way to do this is by creating a daily, weekly, and monthly budget.

Hershfield recommends following the50/20/30rule to help you manage your finances effectively.

Heres how it breaks down, in broad strokes:

50% of your monthly spending goes toward essentials.

Your home, your transportation, your food, etc.

20% of your monthly spending goes toward savings goals.

you might also group debt payments into this category, since paying down debt helps you build savings later.

30% of your monthly spending goes toward everything else.

That might include your gym membership, travel, gifts, and dining out.

Unfortunately, theres no one magic spreadsheet out there.

It may take some trial and error to find one that makes sense for your personal situation.

This approach will lead to significant long-term debt reduction and financial freedom.

Prioritize savings

After directing money to paying down debt, turn to your savings goals.

Avoidthe urge to increase your spendingwhen you receive your tax refund.

Instead, focus on using the money wisely to improve your financial situation and achieve your long-term goals.

Apps likeYNABandGoodbudget(RIP Mint!)

can help you create a budget, track your spending, and set money saving goals.

The visualization and notifications they provide can keep you focused and motivated.

Again, I recommend checking out the best budgeting apps based onwhat kind of saverorspender you are.

Just set a reasonable budget for non-essential, quality-of-life spending.