“You must pay taxes. But there’s no law that says you gotta leave a tip.” – Morgan Stanley
Let’s be real, paying taxes can be a nuisance. Your company says it will pay you a certain salary and while the amount sounds great in theory, in actuality, your bi-weekly paycheck does not add up to what you thought you would be earning. Before you even receive the money, about 25-35% of it is gone – straight into the hands of the local and federal government. On top of that, when we shop we pay roughly 6-8% in sales tax. But we all know it’s for the betterment and operation of our governmental bodies.
I am sure we can all agree the best part of paying taxes is when we receive our tax refunds! Receiving one – if we are fortunate enough – large sum of money that is more often than not, larger than that bi-weekly check feels as if we have hit the jackpot and won a lot of money!
Hoo-ray to us for being law abiding citizens (and obedient followers of Jesus Christ: Matthew 22:15-22 MSG) by paying our taxes!
BUT before you decide to party it up and spend your money lavishly on something that will not bring you any benefits, think about how you could use your new-found wealth resourcefully.
Below are three ways you could use your tax refund money:
- Pay off your debt.
Before you can start to build real wealth, high-interest debt has to be non-existent (or very, very minimal). Living in the USA, having some sort of debt is a form of normality. Between having a mortgage, student loans, or credit card debt, most people are financially indebted to someone or some organization, which in turn makes it difficult if not possible for people to obtain wealth. If not paid with urgency or a strategic plan, holding onto high-interest debt is costlier in the long run. Not only will you be paying back more money than you actually spent with interest rates between 15-22%, but it could take months, if not years, longer to pay the debt.When you are looking to pay down or pay off your debt, consider first how much you can honestly afford to pay. Do not put yourself in a financial bind and miss another monthly bill trying to pay your debt. If you are able, it is best to eliminate the high interest debt first – typically you will be paying more monthly on those types of debts. You may also want to consider paying off in full a debt that is fairly low and revolving, but seemingly will just never die. This will give you one (or possibly more) debt you no longer have to worry about. The Bible says don’t be in debt to anyone but to love him (Romans 13:8 CEB), so let’s get to that point.
- Open up a or add money to your savings account.
Saving is a very tough discipline most people have yet to master. It’s a skill you should work hard to make a habit while you are still young. Building your savings can help bail you out of a jam when you least expect, and should be viewed as a joy and benefit rather than a daunting task. When saving, think of building your emergency savings fund, a college savings plan for your children, or even save for the down payment to purchase a house.A good rule of thumb to save for your emergency savings fund is to have at least three months of your salary stored away – this will help pay for your average monthly bills if you ever had need to not work for a period of time. If you decide to add money to a savings plan for your child[ren]’s education, you could look into the 529 Plan. It is typically available across all states in the USA, and it’s possible you may be eligible for an income tax deduction for the amount you save within a given tax year. Home ownership is great in that it helps you build wealth in equity. However, purchasing a house can be quite pricey, especially on the front end of the process. Prepare to do so by saving money for the down payment and/or closing costs.
- Go on [an overdue] vacation.
If your monthly bill payments are all up to date and you do not have any additional incurred expenses, you may want to consider planning for an overdue vacation you long to take. Visit the beach or a city you have dreamt of visiting. It doesn’t have to be anything extravagantly expensive or over the top, just somewhere you can escape to from your common everyday routine. Search for inclusive trips where you will have all your meals and accommodations [and possibly local transportation] covered. Do your best to budget for your maximum spending limit when on grounds; vacationing without a budget can get out of control veeery quickly if you are an avid shopper and especially if you travel internationally given all the conversion fees.
Bonus: Pay your tithes and offerings to your church.
Yes, your tithes and offerings. As believers in and followers of Christ, we are called to obey and give what belongs to God back to Him each time we receive an increase [i.e., that’s each paycheck or sale in business] out of our appreciation and gratitude towards Him. The minimum requirement for tithes for a New Testament/church believer is 10% of your earnings, and your offering is according to your free will. It is important we always keep in our hearts and minds to first honor God with our substance – for it is He who gives you the strength to get wealth (Deuteronomy 8:17-18 MSG).
Here I am wearing a light pewter colored dress sewn by Ismarh Couture (follow and check out my Instagram page here for her contact information). It’s the perfect, simple look for the office, church, or even a date night.
What are some ways you like to spend your tax refund?