It’s tax refund season, and you know what that means: you can finally stop turning down lunch dates with your girlfriends in favor of Ramen Noodles at your desk… and you can get that new Express blazer you’ve been eyeing… oh and you haven’t bought your boyfriend anything in a while… plus you probably should pay off your credit card.
This is me. Every time I get my tax refund, I’ve spent it before I even get the “deposit notification” from the bank app on my iPhone. It seems there’s nothing more exciting than a financial windfall, but that excitement quickly dissipates the moment I realize I’ve spent the entire refund in less than the time it took me to file my taxes.
But not this year. This year, I am determined to make the refund last. And last. Or at least spend it on more noble causes than the boot clearance sale at Nordstrom. Here are five ways I (normally) blow my tax refund and how I plan to combat them this year:
1) Have the tax refund direct deposited to my main checking account
This sounds like a good idea in theory, but it ends up being a major failure. I realize that sending the refund in its entirety to my main checking account is like putting the cash in my purse… and opening my purse…on a windy day… over an open flame. This year, I had a portion direct deposited to a savings account. That way, if I do end up cleaning out my main checking account, I still have some money set aside that takes more than a simple swipe of plastic at a checkout counter to access.
2) Determine how much I will save after the I receive my refund money
I’ve found that my resolve is severely weakened when faced with cash in hand. It’s much easier to say “I’m going to save $100 out of this check” when the check is still abstract. However, that number drastically lowers if I don’t decide how much to save until I get the money. This year, when I saw how much would be refunded, I did a few quick calculations and realistically determined how much I could set aside and I had that amount deposited into my savings account.
3) Commit the refund money before I get it
Once the New Year hits (and sometimes even before), I find myself starting to justify credit card purchases by saying “When I get my refund check, I will pay the card off.” This sort of thinking is a trap. What I realize is, just as there are things I want before I get the check, there are things I will want after I get the check as well. So, to commit the check toward something before I even get it is never a good idea. This year, the only thing I mentally committed a portion of the refund check to is my savings account; other than that, I will wait to see what comes up.
4) Use the entire refund amount to pay off debt
I admit, I did this one year with a refund I received during school for a student loan. (At the time, I thought it was “free money” until I graduated and realized all of those refund checks were really student loan money that I now had to pay back.) It seemed like a wise thing to do. I got $3,000 in my refund and I owed $3,000 on my credit card, so I put the entire amount toward my credit card. The reason this was not a bright idea was because I had no emergency fund saved up, so if something came up (which something did come up as it always does), I had to use my credit card again. It was a vicious cycle. I intended on getting myself out of credit card debt, but didn’t have a way to keep off. This year, I am going to put a portion toward my credit card bill, but also fund my emergency account, so I don’t have to charge my credit card in case of emergency.
5) Give it all away
I like to think of myself as a generous person. I like to donate extra money to my church and write checks to St. Jude’s Research Hospital. I love to take friends out to eat and pay for the entire check. I like to buy nice gifts for friends and relatives. I just like to give, give, give. The problem with this is that I also like to spend, spend, spend. Being a big giver and a big spender just means being broke and not being able to give anymore. This year, I am still going to use some money to bless others, but I am also learning that I can be a blessing to others without going broke in the process.
What “action steps” do you plan on taking to help you “save” (instead of spend) a portion of your tax refund?