Are you getting a tax refund? Perhaps you recently received your bonus at work? Or with the new tax laws you may notice that your paycheck is a little bit higher than it was before?
The absolute best thing you can do for yourself is tax any one of those scenarios and put that "extra" money towards your debt.
We had a little bit of each of these happen to us during the month of March. We received a tax refund, bonus and are noticing the slight upturn in take-home pay as a result of the new tax laws.
First, if you don't have an emergency fund or haven't fully funded your current fund. I challenge you to start one this month. Take the money we talk about below, and put it into a new or existing emergency fund. It should be a separate checking account, because you want to keep it apart from your normal spending and only used in emergencies.
Set a goal for that fund. Once you hit that goal, let's say $1,000...anything over that amount that is deposited in there each month, do an electronic transfer to pay off your debt.
A Bonus is just that...a perk that you didn't otherwise count on. If you don't have an emergency fund, dump your bonus into that account...out of sight and out of mind. If your bonus allows you to have a fully funded emergency fund, then I challenge you to take your bonus and put it towards any debt you have. For us, that was our mortgage.
If you are getting a tax refund, that means you are withholding too much each paycheck and giving the government an interest-free loan for a year! Take your tax refund and pay it directly towards your debt or to your emergency fund. Then the next step is to change your withholding with your employer to withhold a bit less than you did last year. With that added money coming into your pocket each month, follow my next step below.
Now that you've changed your tax withholding you'll be getting more take-home pay each paycheck than you were last year. A little extra cha-ching each paycheck is always a good thing. Determine what amount you are getting back each paycheck that you weren't before and set it up with your employer to automatically put that amount into your emergency fund account. So for example if you are receiving $50 extra each paycheck because of your change in your withholding, then after 1 month your account would be $1,100 ($50 each paycheck, twice a month let's say). Take out $100 and put it towards your debt. Do it again the next month.
Have it directly deposited each month into this separate account. Have a goal for the amount you want to have in your emergency fund and ONLY use it for emergencies.
Don't pull any money out of that emergency fund unless it is to pay your debt due to a surplus ($100 in my scenario) or a TRUE emergency. That means something you couldn't otherwise have planned for.
In the game of saving and paying off debt EVERY LITTLE BIT COUNTS. An extra $50 a paycheck, twice a month means $1,200 extra a year! If you follow the steps above, you won't even be missing the money you are setting aside, and you'll be paying off your debt (or increasing your savings) much more quickly than you were before.
The absolute best thing you can do for yourself is tax any one of those scenarios and put that "extra" money towards your debt.
We had a little bit of each of these happen to us during the month of March. We received a tax refund, bonus and are noticing the slight upturn in take-home pay as a result of the new tax laws.
First, if you don't have an emergency fund or haven't fully funded your current fund. I challenge you to start one this month. Take the money we talk about below, and put it into a new or existing emergency fund. It should be a separate checking account, because you want to keep it apart from your normal spending and only used in emergencies.
Set a goal for that fund. Once you hit that goal, let's say $1,000...anything over that amount that is deposited in there each month, do an electronic transfer to pay off your debt.
A Bonus is just that...a perk that you didn't otherwise count on. If you don't have an emergency fund, dump your bonus into that account...out of sight and out of mind. If your bonus allows you to have a fully funded emergency fund, then I challenge you to take your bonus and put it towards any debt you have. For us, that was our mortgage.
If you are getting a tax refund, that means you are withholding too much each paycheck and giving the government an interest-free loan for a year! Take your tax refund and pay it directly towards your debt or to your emergency fund. Then the next step is to change your withholding with your employer to withhold a bit less than you did last year. With that added money coming into your pocket each month, follow my next step below.
Now that you've changed your tax withholding you'll be getting more take-home pay each paycheck than you were last year. A little extra cha-ching each paycheck is always a good thing. Determine what amount you are getting back each paycheck that you weren't before and set it up with your employer to automatically put that amount into your emergency fund account. So for example if you are receiving $50 extra each paycheck because of your change in your withholding, then after 1 month your account would be $1,100 ($50 each paycheck, twice a month let's say). Take out $100 and put it towards your debt. Do it again the next month.
Have it directly deposited each month into this separate account. Have a goal for the amount you want to have in your emergency fund and ONLY use it for emergencies.
Don't pull any money out of that emergency fund unless it is to pay your debt due to a surplus ($100 in my scenario) or a TRUE emergency. That means something you couldn't otherwise have planned for.
In the game of saving and paying off debt EVERY LITTLE BIT COUNTS. An extra $50 a paycheck, twice a month means $1,200 extra a year! If you follow the steps above, you won't even be missing the money you are setting aside, and you'll be paying off your debt (or increasing your savings) much more quickly than you were before.
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