I saw this on a bumper sticker once it read “I owe, I owe it’s off to work I go, to make a buck and give it up I owe I owe I owe I owe.” (sang to the tune of the Dorf song in the Snow White). I found it fitting since April is known to us adults as Tax Month.
Raise your hand if you have reived a tax return in the past and have spent it faster then you earned it. I know my hand is up there.
Far too often when we get our tax return, we blow it. I had a friend once tell me she was just waiting for a local Facebook group to blow up with purchased people made from tax returns but now they need the money and selling all the stuff they bought.
It is time to change that. I spoke a little about this at the end of 2019 in the financial goal. We usually get taxes back. Next year may be different now that I am an independent contractor virtual assistant (which means I pay taxes quarterly), I really hope not, but we will see.
Here is how I am going to change it up and not spend my tax refund on just “stuff” this year.
#1 I am going to plan ahead for Tax Month: Making a plan and setting goals to IF you get a tax refund and where is it going to go.
For us, of course, it of going toward debt and savings this year!
#2 Just like every goal it needs to be specific: Don’t just say I am going to pay off my debt with my tax refund, know what debt you are going to pay off.
Our specifics is to first build the emergency fund and then to the credit cards which we prioritized which ones get paid off first to last.
#3 Once you know your return break it down and plan it out: No matter how you file you know the estimate of what your return will be and the likely hood of it being audited. Do some pre-work and know what you are going to do once that payment hits the bank.
First, our refund went toward rebuilding our emergency fund first. I know David Ramsey says $1,000 toward emergency funds then pay your debt down, and then add to that emergency fund but I disagree. After a double job loss and medical bills, I say at least $5,000 to start then add a little every month. Living it really showed me how fast your emergency fund can drain.
Second, I referred to our debt owed worksheet. In the far column, the debts are numbered by priority. I started with the first and got that paid off, and then the little that was left of the refund I tossed toward the second.
Third, and the most important. I set a little aside for us to go out to eat and go to a movie. Aiming for a debt-free life should not feel like a punishment. Rewarding yourself for the small things (which rebuilding an emergency fund and paying off a credit card may seem small but is a huge step in the process) will really make the journey feel like less of a punishment.
You want to follow our financial journey feel free to check out this year past posts.
2020 Finacial Journey
- January ’20
- February ’20
- March ’20
- April ’20
- May ’20
- June ’20
- July ’20
- August ’20
- September ’20
- October ’20
- November ’20
- December ’20
Lessons learned April: Goals can be achieved as long as you really want them to.
For many years I would set Tax return goals then something would come up. Looking back those things were not important at all, just wants. However, now that I am so sick of feeling like I am drowning in debt but don’t want to ruin my credit score I wonder why I just didn’t stick to my goals years ago.
- 2020 Starting Debt: $68,700 (Car’s, Credit Cards, Student Loans)
- Month Debt: due to the pandemic, I have put debt pay off on hold my reasoning will be shared in next month’s financial journey post.
- Debt Pay off: sue to the pandemic, I have put debt pay off on hold my reasoning will be shared in next month’s financial journey post.
Savings Tips: Don’t count on your taxes to bail you out. As well as don’t blow any extra cash you may get on keeping up with the Jones, always ask is it a need, a want, or a simple reward.
What are you going to do with your refund this Tax Month?
Until next month,