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How to spend your tax refund
Today is February 15th, exactly 2 months away from Tax Day…April 15th. If you are new to Calm Cash, you should know we talk about money and mental health and ways to be happier and less stressed, especially when it comes to our finances. Is there anything more stressful than taxes? For me, it is one of the most stressful things in my financial life. And I’m not alone. Each year Tax Slayer does a poll to measure America’s stress when it comes to taxes. Last year 52% of American said taxes were unbearable. These feelings got me thinking about this question: who the hell invented taxes? It also got me thinking about how to help others answer the question: how should I spend my refund? The best way to manage money is to have a plan. And that is what we will talk about today!
What isn’t discussed often is the stress that people feel when they get a refund. In 2019, 111 Million Americas received a refund from the IRS with an average refund check of $2,869. This was down from $2,910 in 2018. This is a good chunk of cash and most people want to spend it wisely. The best way to make sure you don’t have refund regrets is to make a simple plan BEFORE you get the money for how you are going to spend it. Here is my suggestion for creating that plan.
Step 1: Divide your total refund amount into 3 equal chunks. So if you are getting the average refund of $2,869, that divides into 3 chunks of $956.
Step 2: Take the first chunk and put it in your rainy day fund. We’ve talked about this before, in fact that was a topic in episode 1 of Calm Cash. As Americans, we have an emergency savings problem. This is something we all have to keep working on, until we have saved at least 3 months worth of living expenses and up to 6 month of expenses if you are super conservative. This is our “stuff happens” fund for when life throws us curveballs. Keep feeding it and your IRS refund checks are a great source of cash to boost this part of our financial picture.
Step 3: Take the second chunk and go have an experience…with a loved one. This can be your significant other, a family member or an amazing friend. But the idea is to go do something incredible with another person. It will open your eyes to new opportunities and sharing experiences with friends or family has been scientifically studied with countless benefits. Connecting to others makes us more compassionate and gives our lives a greater sense of belonging and meaning leaning to improved motivation, happiness and even longer lives!
Step 4: This is our last chunk of money. Think about the area in your personal financial life that is creating the most stress or anxiety. Is it a student loan balance or a credit card? Is it saving up for a big expense like buying a house or going back to school? Whatever that worrisome item is, put this last piece of money towards that stressor.
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By Ben Jackson
4.9
1919 ratings
Today is February 15th, exactly 2 months away from Tax Day…April 15th. If you are new to Calm Cash, you should know we talk about money and mental health and ways to be happier and less stressed, especially when it comes to our finances. Is there anything more stressful than taxes? For me, it is one of the most stressful things in my financial life. And I’m not alone. Each year Tax Slayer does a poll to measure America’s stress when it comes to taxes. Last year 52% of American said taxes were unbearable. These feelings got me thinking about this question: who the hell invented taxes? It also got me thinking about how to help others answer the question: how should I spend my refund? The best way to manage money is to have a plan. And that is what we will talk about today!
What isn’t discussed often is the stress that people feel when they get a refund. In 2019, 111 Million Americas received a refund from the IRS with an average refund check of $2,869. This was down from $2,910 in 2018. This is a good chunk of cash and most people want to spend it wisely. The best way to make sure you don’t have refund regrets is to make a simple plan BEFORE you get the money for how you are going to spend it. Here is my suggestion for creating that plan.
Step 1: Divide your total refund amount into 3 equal chunks. So if you are getting the average refund of $2,869, that divides into 3 chunks of $956.
Step 2: Take the first chunk and put it in your rainy day fund. We’ve talked about this before, in fact that was a topic in episode 1 of Calm Cash. As Americans, we have an emergency savings problem. This is something we all have to keep working on, until we have saved at least 3 months worth of living expenses and up to 6 month of expenses if you are super conservative. This is our “stuff happens” fund for when life throws us curveballs. Keep feeding it and your IRS refund checks are a great source of cash to boost this part of our financial picture.
Step 3: Take the second chunk and go have an experience…with a loved one. This can be your significant other, a family member or an amazing friend. But the idea is to go do something incredible with another person. It will open your eyes to new opportunities and sharing experiences with friends or family has been scientifically studied with countless benefits. Connecting to others makes us more compassionate and gives our lives a greater sense of belonging and meaning leaning to improved motivation, happiness and even longer lives!
Step 4: This is our last chunk of money. Think about the area in your personal financial life that is creating the most stress or anxiety. Is it a student loan balance or a credit card? Is it saving up for a big expense like buying a house or going back to school? Whatever that worrisome item is, put this last piece of money towards that stressor.