What’s the Best Way to Spend Your Tax Refund?
Isn’t that the $68.00 question? The first time I got a tax refund, it was $600. I had no clue what it was. So naturally, I got a goofy grin on my face, waved it around to no one in particular and spent it.
I don’t profess to have the best technique for spending your refund money. But when I look back on my first tax refund, I have no clue what I spent it on. Nor the one after that. It was my “zero plan” method.
If you want to be more intentional with your refund, try this 3 step formula:
Save: I Challenge you to put Away at Least HALF of Your Refund.
Do you have $1000 set aside for emergencies? If not, that is the first thing you need to do. Put $1,000 aside for emergencies and only use it for real emergencies. This is a powerful safety net.
Already have $1000 saved? Time to slice some debts. Here are some strategies we used to pay off debt in 2012.
If you don’t have debt and already have an emergency fund, consider investing, putting your tax return into your 401K or Roth for retirement.
Challenge: Try and save even more than half!
Give: Review the Last 30 Days. Who Came into Your Life With a Need?
Do you attend a church that has a benevolence fund?
Have you ever sponsored a child e.g for school needs in our own country or for health and other needs in other countries? Do your research to ensure the charity you choose actually uses most of the money for the right cause.
Another option is Kiva Loans. They are microloans in countries where loans are not as easy. We choose to give to the Solomon Islands and Vanuatu. The great thing about Kiva is any money you loan, once it’s repaid, you can lend it again.
Spend: Plan Ahead Together and Agree on set Amounts for Each of you
Date night? Yes, if you’re debating. Date your spouse (just don’t live at the movie theater, like we used to).
Family fun night? I’d love for us to go to the local trampoline park, but the baby never seems enthusiastic when I bring it up with him.
Hobby? Mini shopping spree? Jamberry? This is where you have that freedom. It’s planned and budgeted.
Turns out we gave a little more than usual in 2014. And we had a kid. The government seems to give you a higher refund when you donate and procreate*.
Go Team Harris.
*Don’t get pregnant for the annual tax break. You’ll end up on Dr Phil.
All that to say, we just walked through this 3-step process. Life’s not all about penny-pinching. Go have some fun.
I speak from experience when I say that doing all 3 of these steps together truly is FUN.
ACTION STEP: File your taxes. If your tax refund is already spent, apply these 3 steps to your next paycheck.
What’s one thing you did or will do with your tax refund this year?