This is the financial tool I advocate for the most. I have many readers that continue to be shocked that we choose to keep a cash emergency fund vs use credit cards. All I can say is that everyone knows what works best for themselves, but to be able to have the peace of mind that their is emergency money provide, money that you won’t pay interest on, is a huge sigh of relief. Trust me, emergencies will happen. There are many emergencies that have come up for us (car repairs, loss of job, furlough days, out of area deaths in the family, medications and doctor’s sick appointments, storm preparations, etc.) and I’m sure to can list a few that you wish you had an emergency fund for. So, how much is up to you. Many people are comfortable with $1,000 in a separate account and ideally if you can reach to have 3-6 months of savings then you will be secure if your source of family income lost their job, etc.
Do you have debt? That’s the next step to take stretching your refund. Thanks to Dave Ramsey, we use the snowball method to pay down debt. Simply put, start with the smallest debt (which with your tax refund) may mean you are able to payoff multiple debts this year. This also gives you the mental motivation and inspiration toward paying down continual debt throughout the year.