When most people think of falling in love, they usually think of it as another person. In this case, in February, let yourself love your money again.
We often miss the opportunity to fall in love with our money. The experience can be like two ships passing through the night. An example of this is when we get a lump sum refund during tax season and decide to splurge on items we want, but don’t necessarily need.
Throughout this month, I’ll be writing a series of articles about how you can rekindle your romance with your money and start loving it again.
To understand your decision-making process, you must first understand your relationship with money, how you feel about money, and how you feel about having it or not having it. Feelings play an important role in the development of a healthy relationship, whether romantically or financially.
Your value system, family upbringing, social circles, and media exposure are just a few factors that can influence how you feel about your money. Once you understand your feelings and how they can influence the way you handle your
money, you can begin to reimagine how you progress towards your goal of financial freedom.
Here are some tips to consider when you receive that tax refund this year.
Tip #1 – Start an emergency fund. Nothing beats the comfort of knowing you have some financial security. One big expense can send you on a downward spiral into financial disaster without an emergency fund. Nothing beats knowing you’re covered should the unexpected happen. A good rule of thumb is to save six to eight months of income. Saving that much money can take a while, so using your tax refund is a great way to get there faster.
Tip #2 – Focus on paying off high interest debt. After creating an emergency fund, the best thing you can do with your tax refund is pay off high-interest debt. This includes credit card balances, title loans, student loans and
the money you still owe on your vehicle. The common name for this method of debt elimination is Avalanche. This method encourages you to spend any extra money (your tax refund) on debt that bears the highest interest. Getting rid of that debt as quickly as possible can ultimately reduce the amount you pay in the long run.
Tip #3 – Open a savings account. One of the statements I hear the most as an advisor is that I have no money to spare. Every penny I have is already spent. The IRS allows you to split your refund into up to three accounts if you use direct deposit. This is the perfect opportunity to deposit funds into a savings account you don’t have access to. That way you’ll have it when you need it.
Tip #4-Work on building or rebuilding your credit. Having a good credit score is essential because your credit can affect many areas of your life. Good credit can make it easier to get loans and credit cards, so you can fund big
purchases at low interest rates. The less interest you pay, the faster you will pay off the debt and the more money you will have for other expenses.
The benefits of a good credit score go beyond debt. Bad credit can affect your housing applications, insurance premiums, and security deposits, adding obstacles to enjoying many of life’s daily needs and pleasures.
This trick can definitely free up your money, so you’ll have more to enjoy the financial freedom you’ve been looking for.
Achieving financial freedom can be a very touching act of love, not only for you, but also for your family. Falling in love is an essential part of life and developing relationships is necessary to establish a healthy lifestyle.
Understanding your decision-making process can go a long way in helping you achieve that financial freedom that often seems to elude our best efforts.
February is the month of love; why not consider falling in love with your money all over again? Or why not let your money repay you the love you’ve shown it by using it to achieve the goals you’ve set for yourself!
Next week I’ll cover tip number two, which is debt elimination.
Until next week—stay financially fit!