I stayed up last night until about 1 a.m. to finish filing our 2012 taxes. For the first time in about eight years, I filed my own taxes and used the incredibly simple and intuitive TurboTax app on my iPad. I watched nervously as each figure I entered recalculated the amount of tax I owed until suddenly the figure changed from the color red to the color white indicating that I did not owe more tax; rather, I was due a refund. That hasn’t happened in a few years either. This year we will be receiving a tax refund.
After pressing the submit button, suddenly my mind began to wonder, “what should we do with this money we were not expecting to receive?” Maybe you’ve thought the same thing. If you are like me, you immediately began dreaming about the vacation that you can now afford, or the new MacBook that you’ve wanted for a few years. Maybe now you can buy your kids an iPod so that will leave your iPhone alone. While you could indulge your inner “I deserve this…”, maybe there’s something greater you could do with your tax refund. I believe that if you are intentional, your tax refun has the opportunity to help you achieve some healthy financial goals.
Now that you have a lump some of cash that is outside your monthly budget, you might consider giving some of it away. This not only helps with next year’s tax-deductions; however, it could help a really worthy cause. Maybe you’ve not met your giving commitment to your local Church. Giving a portion of your tax refund may bring you closer to what you committed to give. While I do not think you are necessarily obligated to tithe off of your tax refund, I do think that it poresents an excellent opportunity to be generous.
Ask yourself, “Do I have a fully funded emergency fund?” A good starter emergency fund it at least $1000 in the bank set aside for an emergency. A fully funded emergency fund is 3-6 months of your family’s monthly income. If you do not have a fully funded emergency fund, using your tax refund is a excellent way to build your savings fast. Whatever you’re saving for, whether it be for an emergency, a vacation, or a new car, your tax refun is an excellent opportuunity to save.
3. Pay-off Debt.
Every month your debt robs you of your income’s ability to serve you. The Bible says in Proverbs 22:7, “The rich rule over the poor, and the borrower is slave to the lender.” Because of debt, you are still paying today on something you just had to have yesterday. And chances are, you don’t like it as much today as you did yesterday. A tax refund presents an excellent opportuinity to pay-off a credit card. Imagine what your monthly budget would look like without that credit card payment. It could buy you hundreds of dollars each month giving your income more opportunity to serve you rather than your debt.
The bottom line is this: Your tax refund can be intentionally used to serve you.
Don’t simply splurge just because you have a few extra bucks. It may be a good idea to split your tax refund to accomplish several goals. This year we’re going to pay off a debt and fund our emergency fund. That accomplishes two of our financial goals immediately and returns about $140 a month to my budget’s spending power.
What do you plan to do with your tax refund? I’d love to celebrate with you as you accomplish your financial goals! Leave a comment below to share.