How to Spend Your $3,000 Windfall

Dear Money & Crisis Reader,

What would you buy with $3,000?

A new smartphone? A couple of weeks in the Caribbean?

How about some peace of mind?

Well, you better decide soon.

In just a few weeks you could have a fat government check coming your way in the form of a tax refund. Now obviously, not everybody gets one of these. but there’s a good chance you will.

According to the IRS, eight out of 10 people who file their returns land themselves a refund check.

And it’s no small chunk of change, either.

The average tax return is just under $3,000. That’s more than enough to take a nice vacation or buy the latest piece of tech. Or you could put it to good use and buy yourself a little financial security.

I know it’s tempting to just blow your refund on something big. But it’s not often $3,000 just falls into your lap.

You can use that money to reinforce your finances against disaster and crisis (and take some financial stress off your shoulders while you’re at it).

Here are some of the best ways to do that:

1. Supercharge Your Emergency Fund

An emergency fund is your last line of a defense in a financial crisis.

Put simply, it’s a stash of money you can dip into if your income is diminished or wiped out entirely by a disaster.

You can use this fund to pay the bills, feed your family and give yourself time to secure new income — without worrying about losing your house or going into debt.

If you don’t have an emergency fund, you’re only tempting fate. All it takes is a single crisis — be it a natural disaster, a manmade catastrophe, or something as mundane as urgent home or car repairs.

I recommend maintaining an emergency fund of at least three-to-six months of income. But a robust fund of eight–12 months is even better.

If you don’t have an emergency fund yet, $3,000 is the perfect amount to kickstart one. And if you already have one, you can use your refund to supercharge it and give yourself that added layer of security.

2. Pay off High-Interest Debt

Instead of splurging on something you don’t need, why not use your $3,000 to put a serious dent in your debts?

Start by paying off your high-interest debts like personal loans or credit cards before moving on to low-interest debt.

As financial expert and author of Currency Wars James Rickards explains, “Paying off high-interest debt is economically identical to investing in a high-interest bond.

“It’s compounding in reverse. When you pay off high-interest debt, the monthly debt burden goes down faster than paying off low-interest debt because you save the interest also.”

This will save you money in the long run and potentially increase your monthly disposable income.

3. Buy Physical Silver and Gold

How do you invest your wealth when the next big financial crisis could be around the corner?

A store of physical silver and gold can’t be wiped out by a computer error. And historically, gold’s value increases when the stock market is in decline, making it the perfect hedge against financial crisis.

It’s a good idea to keep 20–50 ounces of pure silver on hand in the form of American Silver Eagles from the U.S. Mint.

Twenty ounces from a reputable dealer will cost about $340 at today’s prices (including commission) while a one-ounce gold coin will cost around $1,382.

4. Enjoy Yourself a Little

Having said all that, it’s important to allocate a small chunk of your fund to having a little fun.

Folks who are new to financial prepping sometimes go a little too hard on themselves, tightening the belt too much and denying themselves any pleasure.

This can often backfire and end up causing “saver’s burnout.” This is the fastest way to backslide into bad spending habits and never saving money.

That’s why when I get a bonus or an unexpected windfall, I always designate a small chunk of that money as “fun money”.

It’s up to you. But for a $3,000 windfall, I’d say $250–500 wouldn’t be an unreasonable amount.

As always, we welcome feedback from our readers. If you agree, disagree or have any topics you’d like us to investigate, you can email me right here.

All the best,

Owen Sullivan
Editor, Money & Crisis

Editor’s note: The strategies you read about in Money & Crisis were developed with the help of Jim Rickards, the best-selling author of Currency Wars and The Death of Money.

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