What would life look like for you if you kept your last 3 tax refunds?
Could you go on the vacation you’ve always dreamed of?
Could you get the car you really wanted?
Would you be caught up on a few bills?
Would you have the same worries you do now?
Is it even possible?
Think about the number of times you saved up for something only to start over. You save for an emergency. An emergency materializes. And, you have just enough cash in the bank to cover it. Now, your money is gone.
There is a way to prevent that from happening to you.
Lessons from the Pawn Shop
Your friend doesn’t have the best of credit. He doesn’t have time to hear “No” from the loan officer. He’d prefer not to ask you for money. So, he takes his guitar and pawns it. He already knows he’ll get less than what it’s worth, but what he gets is just enough to get over a temporary hurdle.
The guitar was a gift from his grandfather before he passed away, so your friend does everything he can to get the money to pay it back. He gets his guitar out of the pawn shop just in time.
A Pawn Shop is a lender just like the bank. There are a few differences, but both of their goals are the same: get more cash back than they lend out.
Lenders want to know 3 things:
- Will your friend pay back the loan?
- Can your friend pay back the loan?
- What happens if your friend never repays the loan?
The pawn shop simply asks for collateral up front, decides if it can be sold for more than what your friend borrows and then keeps it until your friend returns with payment. A bank will run credit and background checks to find the answers they need. Some banks will even ask for collateral to help lower their risk if they don’t get their money back.
Back to your tax refund. Your bank makes money by lending out your deposits with interest. Why not borrow money from the bank using your tax refund as collateral? The interest rate won’t be nearly as high as a regular loan and, you’ll be motivated to repay the debt quickly.
The key is to be disciplined. Make sure you only borrow a portion of the amount you have saved and only borrow an amount you can afford to pay back in a short time period.
If you’d like to learn more about this concept, check out the book Keep the Fun, Plan for the Future. This book will help you focus on your needs first. It will show you how to include fun and savings in your budget, even if you’re trying to climb out of debt. You can even use your savings to get out of debt without having to save all over again!
Think about it: this time next year, your tax refund could still be in the bank for years to come!
The book is a quick read, so you can get started on the concepts right away.
Don’t let your tax refund end up in someone else’s hands before reading this book.