Smart Ways to Use Your Tax Refund

Woman working on tax refund

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Everyone loves getting a tax refund (although there are some people who say it is better to get $0 back). If you do get a tax refund, there are tons of smart money moves to make.  Many people use their tax refund as a way to start their emergency funds, big purchases, or debt repayment. Before you spend your tax refund, make a plan for your tax refund even before you know the amount. You will make the best use of your money if you decide ahead of time how you would like to spend or save your money. Take some time to look through your budget and see how to use your money wisely.

Let’s dive into how to do that:

How Do You Decide?

It might be difficult to decide when you have so many money goals but I want you to decide before you even know the amount. I know you might be thinking “umm what Alli?!” but let me explain. You need to think in percentages instead of amounts. Your full tax refund is 100% and then break it down into different percentages. Do you want to spend 50% on paying down debt, 30% to go towards savings and 20% for spending on what you want? Making these decisions ahead of time helps you to stick to these amounts and not change your mind no matter how much money is given back to you. 

Below is a simple google spreadsheet (you can create this yourself or you get this template and dozens more when you join Flourish FinanciALLI 

Once you decide on your percentages, then look at each category and write down the top 1-3 things you want to do first. If you are using 50% to pay off debt, what does that look like? Will you pay off one credit card first and then put the rest of the money towards your next credit card? Will you put some towards student loans? Think about your savings amount and decide what you want to do with it. Do you want to put it towards having an emergency fund, maybe a sinking fund towards a new car? For the spending part, what are some things you might want to splurge on? Is it a computer? A vacation? Some new clothes? Give yourself an idea for each category to help you stay on track with what you want to do with your refund to make it work the best for you. 

Ways to Use Your Tax Refund

  1. Emergency Fund
  2. Debt Payoff 
  3. Education Expenses
  4. Home Improvements
  5. Retirement Accounts
  6. Donate to Charity
  7. Taxable Brokerage Account
  8. Vacations
  9. Investing For Your Kids
  10. Other Wants
  11. Add to Other Sinking Funds (home, car, wedding, pets, etc.)

Next Steps

Now, you put your plan in place. Decisions have been made as to the percentages you want to spend on each category and what the order of importance of spending your refund is to you. You can allocate your money easily knowing that you have made a plan and you can stick to it!

If you are struggling to create a realistic financial plan you can actually stick to and want some help figuring out HOW you can pay off debt, save, and spend ALL the time (not just tax season), you can get 60% off my best-selling workshop, managing multiple money goals.

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Alli Williams

I’m the CEO of FinanciALLI Focused LLC and our mission is to you get rid of financial anxiety, build wealth & reach your big money goals. You can pay off debt, save, and spend at the same time (I’ve done it, you can too). 


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