You might be feeling like you won a jackpot between the third stimulus check and your tax refund coming around the same time. For many families, excess money like this is very rare and they aren’t sure if they will see this much extra again. While putting this money towards something fun like a vacation or new furniture sounds like a good idea, it’s important to take a step back and look over your finances first so that you’re managing this money responsibly and methodically. This means that you must prioritize urgent matters over entertaining or impulsive purchases.
First, make sure that you are not behind on housing payments. If so, this stimulus money and tax refund should go towards that so that you don’t face foreclosure or eviction. Same with your car: make sure you are not behind on payments or you could face a repossession.
Next, look over any debts you have. Do you have student loans, a car loan, credit card debt, medical debt, and so on? How behind are you? Are bill collectors calling you? Look over your balances for each debt and see if you can use this extra money to pay any off, or at least make progress on. The easiest method is to start with the smallest balance first and then work your way up so you can celebrate little wins.
Once housing and debts are addressed, see if there’s any money to put towards your emergency savings, which should be 3 to 6 months worth of expenses. This way, you don’t have to go back into debt by living off your credit cards if dealing with a job loss or relying on it for a car repair.
If you’ve done all of this already, or you worked your stimulus and tax refund money into this and there’s still money left over, now you can consider using that money towards something entertaining. After all, you can enjoy your vacation much more knowing you don’t have overdue bills waiting for you when you return home.