How To Responsibly Spend Your Tax Refund

How To Responsibly Spend Your Tax Refund

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What holiday comes after New Year’s? Valentine’s Day? Easter?

Income Tax Time! Woot Woot!

When I was young, (which couldn’t have been that long ago, right??) my tax return was exclusively used as my vacation fund. But now, as a wife and momma of two, it’s a different story.

I’m going to be totally honest with y’all… we depend on our tax return.

What Our Tax Return Means To Us

As a single income family we run on a very tight budget all year long. It doesn’t have a lot of room for emergencies and large (unexpected) purchases. I’m not talking about frivolous purchases, like a brand new tv (sorry hubs); I’m talking much needed tires for the truck, expensive dental work, new household supplies. So when that W-2 rolls in, the race is on to file our return.

I know we aren’t alone in our anticipation. But it’s important to spend the money wisely, or it will quickly disappear with nothing to show for it. So I’ve put together four (responsible) ways to put that check to good use. (Keep reading to see what they are!)

First, Make A Plan

It is critical to have a plan established before you have your tax return in your hands.

To do that, you’ll need to gather all of your financial information and decide where that money will be best used. It can all go to one specific need, or it can be spread it out to cover a few things.

How We Do It

It’s important to work together with your hubby to establish a plan for how to spend the money. If you are both on the same page, just like with the rest of your finances, you will eliminate the opportunity for a fight.

In our home I know the household needs and Big L knows the vehicle needs. So what we do is have a sit down and discuss what each of us thinks the tax return money should be used for. And of course we talk about things we wish we could spend it on… spontaneous winter vacation to South Carolina anyone? Then we make a list of where exactly the money will go.

Keep in mind that if it’s at all possible, you should set aside a small amount to be used for a little family fun. Keep it simple: family ice cream night, new DVD for a movie night, day trip to Cabela’s (or this one is this just us?). Focus on making it an experience, not just a toy that will get lost under the bed next week.

Now that you got all that, go make your list!

4 Ways For A Single Income Family To Make The Most Of Their Tax Return

Money goes fast… and that’s especially true for your tax return money. But now that you have a plan in place, you can be sure your priorities are paid for before the funds dry up.

1 – (Don’t) Spend It!

Use your tax return to start a savings account (or add to an existing one). We all know that we should all have a savings account – whether it’s set aside for a specific goal like an emergency fund or a downpayment for a house. Use this year’s tax return to actually do it!

Another great way to use your money without actually spending it, is to start a college fund for your mini-mes! You never know, your little homeschooler might turn out to be the next science prodigy and need a large college fund before they turn 16… just sayin’.

2 – Pay Off Your Debt

You want to make the most of your single income budget by eliminating as many monthly payments as possible. Take your tax return and pay off a chunk of your debt. Whether it be credit card(s), vehicle loan, or student loan – pick one to pay off. This is where Dave Ramsey’s Debt Snowball Method comes into play.

Let’s use your credit card as an example here. Now that you paid off your credit card, you will take the money that you would have paid on it this month and put it towards the next bill – say, your car loan. Now you’re paying extra on your car loan every month, allowing you to pay it off sooner. You keep doing that until you have successfully paid off all of your debt! Seriously, check out Dave’s method, it’s so easy you’ll kick yourself for not doing it sooner!

3 – Vehicle Maintenance

It’s a simple fact that vehicles run better and last longer when they are properly maintained. That doesn’t just mean wiping up the milk that your toddler sprayed all over the back seat. And depending on what you drive, the preventative maintenance can be quite costly.

So what better time than tax return season to take your wheels in for a little TLC? Make sure you are set for the year: tires, brakes, battery, and anything that your (trusted) mechanic recommends to get you safely down the road.

4 – Start Your Stockpile

I know I’ve said it before in this post, but I’ll say it again. I (not so) secretly long to be an extreme couponer and build up a massive stockpile in my basement. It hasn’t come to fruition yet, and I’m not sure it ever will. But we all have our dreams…

Instead, I have found another way to build up a stockpile of household and personal care items to last your family for an entire year! I call it the Income Tax Stockpile. Not very catchy, I know… I’m working on it 🙂 

The ITS method is simple. There’s no coupon cutting and organizing, no scrounging for newspaper inserts, and no store hopping to find the best prices! Follow these 3 easy steps and you can feel good about the way you spent your income tax refund. You will also have freed up money in your monthly grocery budget! Ok, here’s the breakdown of building your ITS:

  1. Make a list of the items you want to include in your stockpile.
  2. Add to your list the amounts of each product that you will need for a whole year. The goal here is to make sure you buy enough of each item for the whole year. (You can also go for half a year’s stockpile, whatever works for your budget!) If you joined me in eliminating your disposable usage, you’ll be able to see your yearly savings in action!
  3. Head to your local Wally World, or you can even stay home in your jammies and shop on Amazon, and build up that stockpile! Nevermind the sideways glances that you’ll get loading your cart full of TP. And on that note, be sure to bring hubs with you because you might need more than one cart!

If you’re not sure how much supplies you should get for a year’s stockpile, check out my list here! Who doesn’t love a FREE printable?! This handy dandy checklist has everything my family of four is loading up on this year, and there’s extra room at the bottom for you to add your own items too! Our one year stockpile haul comes in at total of $441!

I’ve Got My Mon-ay!

So you have your plan in place, and you’re just waiting on your tax refund to go into your account… be patient young grasshopper.

Once that money gets deposited in your account I want you to stop and take a deep breath. Congrats are in order, because you made it another year momma! Living on a single income isn’t easy. It takes hard work and some serious planning. This time of year is a little reward for sticking to your budget all year long. Make your refund work to your family’s benefit and keep up the awesome work!

Here’s to another year of frugal family living!

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