It’s about time for tax returns to start coming in. With that said, you may be one of the many Americans that will shortly be receiving a check for thousands of dollars. Unfortunately however, most people will make bad choices with this money and it just won’t go very far for them. But, if you make the right decisions, you won’t have be one of those people. Below are 3 decisions that you will help to make and a bit of guidance to help you do that while considering your unique financial position.


#1 – Will You Use The Money You Receive To Pay Off Debts?

Almost all Americans have some kind of debt. It could be auto loans, mortgages, credit cards, signature loans, ect… With that said, when you get your tax return, chances are, you will ask yourself, “Should I use this money to pay down a debt or two?”. In many cases, this is a great option. However, before deciding to use the money that you receive to pay off your debts, you should gauge the opportunity costs associated with that decision.

To do so, figure out how much interest you are charged on the debt that you plan to pay down. Now, think about the investments you have out there. Do you have any that pay interest at a higher rate than you pay on your debt? If so, it will actually cost you money to pay more than the minimum payment on that debt. This is because the extra money that you send can be making you more money than it costs you in interest!

#2 – Should You Invest The Money That You Receive?

If you’ve done the calculations and found that you earn more interest than you are charged, chances are, you will be considering investing your money where you earn the most. But, is this the best decision? There are a couple of things that you should think about when making this decision. First, think about your employment. Are you in a steadfast career with a strong company? Do you feel secure with your career? If so, chances are, investing the money is most likely a good idea.

However, if you don’t feel secure with your employment, you may want to consider the economy. Although, it is getting better, bit by bit, it is definitely not great! With that said, if you lose your position, you may find yourself in a bad spot without savings. Thinking of your savings, do you have enough money set aside to cover your expenses for 6 to 9 months? If not, you may want to consider putting the money that you receive into savings as a financial pillow!

#3 – Should You All Of Put The Money In Savings?

Finally, it’s time to decide if putting the money into savings is a good idea. This is a fairly simple decision to make. If you’ve decided that investing is not a good idea based on your employment and savings positions, then you should either save or pay off debts. The only reason that you should consider using the money to pay down debts in this situation is if you have any past due debts. If this is the case, it will be better for your overall financial stability to pay down your past due debts. This will take some of the weight off of your shoulders when it comes time to start thinking about improving your credit score!

About The Author – Joshua Rodriguez

This article was written by Joshua Rodriguez, proud owner and founder of CNA Finance and avid personal finance journalist. Join the conversation about this article or any personal finance topic of your choice on Google+ or facebook!