Episode 3 | 15 Mins
Let’s Spend Your Tax Refund!
The average IRS refund in 2019 was $2,725. What did you do with yours? Better yet, what are you planning to do with your tax refund this year? In this episode, I give you a few ideas of how we can spend your money.
Hello, hello, hello. Welcome to Tech Talk with Kesha. Shantae. I am Kesha. JOHN take listen. It’s January, which for many tax professionals and many Americans across the country can only mean one thing. It’s tax refund season. And now you might be listening to this thinking tax refund was a tax refund. I don’t get one of those. And let me tell you that is tax professionals. We don’t hear that joke often enough.
Listen, the IRS estimated that the average refund that was issued in 2019 was $2,725. Which means that a lot of people got a lot of money from uncle Sam, and if you’re one of those peoples that do get a tax refund, what are you planning on doing with it? Have you thought about it? Is it already spent? If you’re not careful, if you’re not budgeting, if you’re not planning that money can be gone as quickly as it came, which, of course, we’re talking relatively here because the IRS don’t do nothing quickly. But y’all know what I’m talking about. Right? So if you don’t know what you’re planning on doing with your refund, you come to the right place because I have a couple of ideas for you. Now, some of the more common suggestions of using your refund are to put money into an emergency fund, right? So you put a little bit of money aside for a rainy day. So if somebody loses a job, if an emergency comes up, you will be able to pay for bills. You’re not going Gonna be struggling or stressing out wondering how you going to pay for bills. So that’s one thing and it’s a good idea it’s really it did definitely is a good idea if you don’t have an emergency fund already set up to put some money and started I’m not saying to put all of your money into an emergency fund, but you know, it’s a good idea to have a little bit of money saved for a rainy day. Another option or a suggestion that is often put out there is to pay off debt, some of your smaller either your smaller debt or your more high interest debt, go ahead and get it paid off. Now, if you can’t pay off your higher interest debt, I usually suggest going ahead and paying off the smaller debts because that those debts will just be gone. They’ll be off your plate, you don’t have to worry about them anymore. And then you can take the money that you were using to pay those debts and put it on your bigger desk that is typically called The snowball method. But paying off your highest interest debt is also a good idea as well, because over the long run that will cut down on the amount of interest that you pay. The most important thing though, if you are paying off debt paying down debt is to not run it back up, because then that defeats the purpose. So if you do want to go the way of paying off debt, make sure that you have a plan in place to not use those credit cards or line of credit or payday loans or whatever, again, so that you don’t end up in the same place that you just were because then you basically don’t have anything to show because you’re in the same spot on the at the same token or on the same token or to the same point. So another suggestion that you kind of see floating around is to pay up several months of bills. in advance, and this is usually like your rent. So if you get paid three months or rent six months or a whole year of rent, go ahead and pay it up. Some people suggest that not everybody, then you get into situations where if you have to move before the lease is up and all kinds of things then so definitely take that you know, into consideration. But you can also pay your mortgage, you know, put more money on your mortgage, put more money on your car, so that you know you’re paying it off quicker, you’re paying less interest. And, or if depending on what kind of mortgage or what kind of car note you have, if you pay six months of car note, then you have six months before you have to make another payment. Not all car notes are like that anymore. Not all mortgages are necessarily like that. But you might have one that’s that is that operates that way. So if you pay six months with a car of your car note, then you can go another six months. Without paying but I would suggest continue to pay your car note so that you can take six months off the back end or even more because the interest and if you don’t keep paying your car no in that timeframe use that money that you were putting on your car to do something else with constructive so that you’re not you know if you’re just taking your $300 or $500 or whatever that you normally put on your car and go in spend it on something else and at the end of the day, you have nothing to show for it you’re right back in the same spot. So those are some of the kind of like things that are around the internet and I felt like because I am in a you know moving towards a debt free life myself, I would be remiss not to mention, but some of the other ideas that I came up with that I have for your refund are to one learn a new skill or develop a new skill. Excuse me learn a new skill. are developing existing skill that you already have. And also, or also invest in a skill for your child, or develop ones that they already have as well. And this could be if you like sewing, take some sewing classes, find a book, you know, buy a book that teaches you how to soak, sign up for a sewing course if you like photography, invest in a you know, invest in a photography course or things like that, so that you can develop that skill. And that can just be kind of personal enrichment. It can be kind of self care. Or it can segue into my second idea, which is starting a business. So if you’re investing if you’re learning a new skill or you’re teaching your children a new skill, it can just be something that you guys do you do for fun. Do as a hobby do to me wine. Or you can take that scale, make it marketable, and generate some additional income into your household to help you build your emergency fund, pay off debt, do all those things right? The third option that I have for you is to invest in stock so that you are building your portfolio investment portfolio. And I would probably suggest some kind of dividend stock so that you are generating actual income throughout the year, you’re not waiting until the stock is sold, maybe do a mix. I’m not an investment expert. So I’m going to defer to the experts on that one as far as how your portfolio mix should be. I don’t even know if that’s the real term for it, but I’m going to defer to them on that but that’s definitely an option is to start investing in stock or some other assets. So that you can start generating additional income for your family. Another option number four, is to put money into an IRA, if you can, and put it into a Roth IRA, if possible, you have until if you’re wanting to put money into like a traditional IRA, you actually have until April 15, to put that money into your traditional IRA for 2019. So you could do your return, see how much money you’re getting without the deduction and then put the do an estimate and see if you were to put the maximum amount of the IRA contribution. If you were to put the maximum amount as an IRA contribution, what would your refund be, and then put that money into your RA, your traditional IRA, you put it into a Roth IRA, you don’t get a deduction you still have up until April 15. To make that contribution, though. But now you’re saving money for retirement. And in some cases, you may not be saving money at your job, you may not have access to a retirement account. So it’s good to go ahead and put money into a retirement account. Especially like I said, if you don’t have access at work, now, This to me is a little bit different than just putting money into a regular savings account, like an emergency fund, because this is going to grow for you, especially if you put it into a Roth tax free. So when you take it out, when you are 60 years old, then there’s no tax on it. So you’ve already paid the tax on it now with your tax refund, which is already non taxable to you, right? So you want to you know, kind of look into things that can help you generate additional income, and in this case, it can, it’ll grow tax free. And then in this case, you’re not necessarily generating income, but the earnings will grow tax free and then when you take the money out When you’re, you know, retired down the line, then you will not have to pay taxes be put into a Roth, you will not have to pay tax on the distribution, which is kind of like generating income in your old age because you’re not having to pay tax when you’re saving money. And the last option is another kind of personal enrichment, self care. It’s kind of thing. Anyway, the last thing that I have for is kind of personal enrichment, again, kind of self care is to go on a vacation, but not just any vacation, go on a volunteer trip, take the money, take your kids, take your family, and go somewhere that needs volunteers. Help out another community, see how other people you know, see how other people live and not necessarily to say like, you know, oh, You know, we live better than anything but, you know, I grew up all around the world as a military brat. So I just have an appreciation for a lot of other cultures. And I feel like if you do go on these kind of trips, you get to it you appreciate how other people live you appreciate, you know how how happy other people are with a lot less than that, then what we may have, and you kind of just get a different outlook on life. And so even though that’s not something that’s going to generate income for you, it’s not going to be something that’s going to save you taxes down line. even though it’s not something that’s going to save you taxes down the line, necessarily. You know, it’s something that will help you build memories with your family and just put, you know, put them a little bit of money into your, you know, your good karma bank. So, those are the five ideas that I had for your money, but I also have a bonus tip, a bonus idea, if you will. If you’re you’re one of those people that get a good chunk of change back without huge refundable credits. Right? So you are getting several thousand dollars back but you don’t qualify for earned income credit. You don’t qualify for the refundable portion of the child tax credit education credits or anything like that. And your refund comes strictly because you pay too much. Stop getting refunds. Yes. I said what I said, Stop getting refunds. You’re literally just giving the IRS a tax free loan. And you can keep more money in your pocket by adjusting your withholding to have that money that you would have gotten a refund come back to you in your paycheck. So as an example, if you did get $2,725 as a refund in 2019 that equates to just over $220 that Could have been per month that could have been in your paycheck. So if you get paid every you know, twice a month that’s $110 extra money in your paycheck. It breaks out a little bit differently if you get paid every other week. But basically what I’m saying is that’s money that you actually could have had a your paycheck. So I feel like I could do something with $200 every month. And I feel like you probably could do something else with $200 every month instead of sending it to the IRS. So hash tag team no refunds. And again, if your refund comes strictly because you are paying too much in stop doing that, okay, so I hope this help you come up with a couple of ideas to plan for your refund wisely this year. Let me know down in the comments, what you plan on doing with your refund and what kind of content you like to see here. And if you happen to be listening to this on a podcast that I may or may not be launching sometime in the near or distant future, make sure you’re following me on Instagram and Facebook. I am at the millennial tech expert in both places so that you can message me and let me know what you think about this episode. Or you can email me at help at the millennial expert calm with your thoughts.
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