b. Why you should use your refund to pay down debt
c. Tips on how to go about paying off debt (35% of taxpayers surveyed will pay down their debt)
Tax time is just about here. For some of us that invokes a sinking feeling, for others it sparks a sense of anticipation and the burning question: what will you do with your tax refund?
Here's a novel idea: how about using it to improve your credit?
You can and it's very simple. You just have to come to grips with a few things first.
For starters, the average American carries an incredible $8,400 in credit card debt. When you consider that the interest rates on this debt can be as high as 30%, this is a very expensive statistic.
If you are one of these average Americans carrying too much debt right now, using your tax refund is a smart and easy way to pay it down. And the best part is, reducing your debt can boost your credit, improve your interest rate offers and save you a lot of money in interest charges. Sure, that might not be as fun and exciting as a spontaneous long weekend in the Caribbean, but when you think of the long-term value of reducing debt and improving your credit, well, sacrificing your fun in the sun today may help you afford a lot more vacations in the future.
Here are a couple of quick pointers on how you can start paying down and reducing some of your debt, too:
Pay off your debt rather than moving it around
The most effective way to improve your credit in this area is by paying down your revolving credit. In fact, owing the same amount but having fewer open accounts may actually lower your score.
Make more than your minimum
First, break the habit of only paying the minimum. Paying only the minimum and only a fraction of the interest is exactly what the banks want you to do. The longer you take to repay the charges, the more interest they make, and the less cash you have in your pocket. Pay as much as you can afford each month.
Target your debt payments
Consider starting off by paying the most you can toward the credit card with the highest interest rate. Pay it off as quickly as possible. Then move on to the card whose interest rate is almost as high, and so on, until you have paid them all off as quickly as possible.
If you must, turn to your savings account
Ok, this is a last resort. No one wants to dip into or deplete their hard-earned savings, but if you're using it to pay off an 18% APR credit card, it's essentially the same as getting that 18% return without any risk on your part. The higher the interest rate on your debt, the more attractive repayment versus savings becomes.
Renegotiate terms with your creditors
Many creditors are willing to do this. All you have to do is ask. You have nothing to lose and in many cases you can shave 3, 4 or even 5 percent off your APR, and you'll pay down your debt faster.
That time of year again has arrived. Thoughts of completing your tax return as well as paying for it may be hanging in your mind. If you had planned in advance or will be getting a refund instead, you shouldn't be faced with the dilemma of preparing and completing your tax return at the last minute. While sending off payment for how much you think you owe will give you an extension of the filing, this would be an appropriate time to assess your business' financial situation and performance as well as your business' practice and procedure of record keeping.
For those of you who complete their returns manually, with the help of a tax software or with the aid of a tax professional, the process of your tax return preparation and completion will be simple if the records of your income and expenses are categorized in the same manner as that found on the IRS form.
If you prepare your taxes manually by hand, all you have to do would be to transfer the totals from your matching categories with those found on the IRS form. If you would be utilizing some sort of tax software, you would be asked for your expenses in a similar category. You will definitely save time as it wouldn't be necessary for you to break the expenses from your existing categories to match them with the IRS form categories. If you have the help of an accountant or a tax professional, you have categorized your expenses for your tax preparer saving you both precious time and saving you money in the end.
If you find it somewhat difficult matching your own expense categories with the categories found on the IRS forms, then you should be making the necessary adjustments to your bookkeeping procedure and practice.
After completing your tax return, you would want to examine and take a look at your income and expenses. You would have to consider if you had made enough money to meet your expenses. Otherwise, if you had incurred losses it would be necessary for you to increase your income or reduce your expenses. A combination of the two would be ideal.
It is always best not to prepare your tax returns in a rush or at the last minute. Tax time is a great opportunity for you to be able to see the necessary changes that will benefit your business in the year ahead to help it grow. If you complete tasks routinely during the year, then you wouldn't be burdened when it comes to preparing your annual tax return.
Both Elena Laramie & are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Elena Laramie has sinced written about articles on various topics from Credit Card Offers, Finances and Free Credit Report Score. TransUnion's TrueCredit empowers consumers to manage their credit health, providing information on credit-related issues that range from the significance of a