Planning a Budget With Your Return

Another way that Americans commonly use their tax credit rebates for is as an "excuse" to finally get on a budget and begin to live entirely within their means without any reliance upon debt whatsoever. If you've tried setting up a debt before and been discouraged by the bottom-line you found during the process, getting a tax refund and using it to boost your short-term income is one method of overcoming that discouragement. You can pay off and eliminate those debts that make budgeting seem like too much of a chore or impossible, or you can use your tax refund to pay ahead those debts with lenders that will give you advance monthly credit so you don't have to pay the bill again until your credit has been used up. This allows borrowers to save up to pay their next bill months in the future by putting away their payments over time and hopefully staying ahead of the due date.

Setting up a Budget

Using a lump sum of money like your credit rebates to set up a budget is easy. First you build your budget by listing all of your sources of income at the top of a page or spreadsheet. Below that, the amount of your monthly necessities of life - shelter and food - are subtracted and below that the other bills and expenses you must pay, such as utilities car loan payments and any credit card payments that you have. You should include your savings in the list every month as well as your other expenses that you should save up to pay for such as clothing or buying gifts for others for birthdays, anniversaries, etc. You also should include all of the little things you buy on a regular basis such as lunch out when you are at work, or the weekly movie rentals that you might have as a tradition with your spouse. Every cent you earn, and every cent you spend should be listed. When you are finished, the next step is to apply your tax refund to some of your bills and watch the savings and other niceties grow as a result.

Say you are receiving a tax refund that totals $2800 and you have three credit cards that you regularly pay the minimum on each month to a total of $100. That's $100 out of your monthly budget that you certainly could find other uses for. Dividing that $2800 among your three credit card balances may pay one or two of them off, meaning that you can now adjust your budget amounts in the prior step to absorb and redistribute those minimum monthly payments.

You can receive assistance from your tax preparation company on setting up a custom budget specific to your needs and finances.