Refunds, raises and bonuses: use them to change your financial situation


ANGELA BRAUER: 4 Your Money afternoon tax refunds are
showing up in bank accounts right now, good news for a lot of us. People also
receiving raises or bonuses this time of year. NICK MCGILL: Yeah our financial expert, Andy Mattingly, says how you use this money has a dramatic impact on your financial
future but what are the best moves to make with money like refunds or bonuses? ANDY MATTINGLY: Well one of the first places is if you have any debt is to pay that down, you
don’t attack the high interest rate first, that makes a big difference in
your life going forward. ANGELA: What if you don’t have any debts? ANDY: Well then look at your most
important savings priorities. Maybe it’s starting an emergency fund or building
it or education funding or even retirement funding, that’s good things
that have long-term impacts. NICK: Are there any other type of savings priorities we should be looking at? ANDY: Yeah maybe you have a planned purchase this year vacation maybe you know holiday
things like that or maybe a snowblower with all the snow coming in. Those are
the things that you could use this money for so that you don’t add any debt. ANGELA: Is there anything that we should try to avoid with our bonuses and our tax
refunds, any mistakes? ANDY: Yeah, a trap that a lot of people fall in is
that they use this and do something and then they spend three times the amount
of money and then they get into more debt instead of using this refund to you
know to get out of debt. NICK: Okay so what did you do then to make sure that you’re not
squandering that raise or that lump sum? ANDY: Well one of the big things if you get a raise is to make sure that you take 50 percent of your raise and start saving
it automatically. You can spend the other 50 percent or use it to pay down debt,
but if you save 50 percent of that raise every year you help kind of control your
spending. ANGELA: Alright so let’s talk about that saving where are the appropriate
places to do that? ANDY: Well the first place would be is if you’re not at ten percent
of your income for retirement then use your raise to get yourself to 10 percent.
After that maybe it’s in your emergency fund or some other place like that but
all of these things will make sure that you control your spending and also you’ll
have more money for savings. And if you think about if you save 50% of your
raise for the next 5 years, all of a sudden you’re saving a lot of money. NICK: Alright so don’t think of your tax refund as free money. ANDY: Exactly ANGELA: I still like seeing it in my bank account though. NICK: Love it! ANDY: Exactly NICK: I may have spent a little bit of it you know. ANDY: You can spend some of it, just be smart with it. ANGELA: Be smart with it. Thank you Andy ANDY: Thank you

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