$3,000, $30,000, $1,000,000 and even $11,000,000 have been made (the last one is alleged) by individuals investing in GameStop. It’s all pretty glamorous. But while these investors will be facing the wrath of the capital gains tax from their unexpected windfall, up to 73% of Americans are expecting a more favorable response from the IRS. Tax refunds!! In 2020, the average income tax refund was around $3,000. That’s a big lump sum, and since we all want to get the most out of our money, it’s going to require big plans. In this blog we will go through the various ways you can spend your tax refund cash.
When I first receive my tax refund, I definitely spend a few minutes day-dreaming about all the different things I want to splurge on. HOWEVER, as much as I would love to indulge, I have to be realistic. I first start with asking myself, what debt do I currently have? I want to make sure to get rid of any looming dark clouds of owing people money; credit cards, loans, medical bills, any and all debts. Once I know I have a clearer sky, I try to list any repairs, fines, toll bills, or any other “repairs” I have been meaning to fix. This may also include paying off my cell phone or other bills. The point is, you want to have NO dark clouds, ONLY bright financial skies.
Now that I’ve taken care of the not so fun stuff, time to get into some self-care. I’m not talking about indulging just yet, I’m talking about your financial well being. If you don’t have an emergency fund built yet, tax season is the perfect time to start one. If you already have one with the Rainy Day Savings Program, putting your refund towards that account could help you gain some of those incentives which would get you even MORE money! Another opportunity would be to put your money to work through investments. Opening up a retirement account, an HSA, or putting some of your refund into your IRA(Individual Retirement Account), are great ways to secure your financial future. In fact, the IRS has made it very easy to distribute your refund amongst any of your accounts through their 8888 form. If you need assistance with this form, or help exploring any of these savings options, ACC offers access to awesome financial coaches (for FREE) who are happy to help!
Okay…the moment we have all been waiting for…how can we indulge ourselves with all this glorious green. Well, I want to first congratulate us on surviving 2020…that was a huge accomplishment in itself and we deserve to reward ourselves for making it through! When I make it to this point in my tax refund plan, I want to look at my goals. This is where you check into your new year’s resolutions and see how you can use this money to improve yourself and INVEST in YOU. Did you want to learn a new language? Sign up for some classes! Did you want to gain better health? Go get that new blender or yoga mat you’ve been wanting! Did you want to finish a home improvement project? Go get that paint! Whatever it may be, use the last dollars of your refund to help improve your life. You deserve it!!
So to sum it up: pay any debts, save and invest, then use the rest at no expense.