What To Do With Your Tax Refund So It Doesn’t Disappear: Pay Off Debt, Fund Your Savings Buckets, or Treat Yo’ Self? | 528

0:00Shayna:Shayna, it's tax season.

0:02Vanessa:Oh, it's everybody's favorite season. Oh, no, maybe not. Maybe it's just mine. I don't know. No, it's no one's favorite season, but it's still inevitable. We were having a history lesson about when the income tax started at dinner the other night. So anyway, let's not get into that. That's not, we're not here for that. We're just here to help you think about what you should do with your tax return.

0:22Shayna:Yeah, and we just want you to be better prepared. So we don't want you, we don't want that money to be gone before it comes in. and we don't want that money to go out of your account and you have no idea what happened to it.

0:32Vanessa:Nothing to show for it. So we're going to walk you through step-by-step what to think about when it comes to all things tax return. We're going to talk about why, if you're getting too much or getting a big return, what maybe you should consider with that. If you're owing, what you can do differently. And then also, if you are getting them out, exactly what step-by-step decision-making process you should go through in order to decide what to do with it.

0:54Shayna:Do you make good money but have nothing to show for it? Are you tired of living paycheck to paycheck? Do you have big dreams for your financial future?

1:01Vanessa:Do you want to get debt-free, but you don't want to live on beans and rice? Or you don't want to give up those pumpkin spice lattes? Hey, it's okay if you don't already know how to budget,

1:09Shayna:or if you're using credit cards to get through the month. Hey, it's okay if you want to seem like you have your finances all together, or you're not on the same page with your spouse when it comes to finances.

1:20Vanessa:We know what you're doing probably isn't working, but guess what?

1:23Shayna:You're in the right place. We're Shana and Vanessa. We're best friends, business partners, and master financial coaches trained by Dave Ramsey. We've been in business since 2019, helping hundreds of amazing people like you create budgets, get out of debt, stop living paycheck to paycheck, and know exactly what to do with their money.

1:41Vanessa:In this podcast, we'll share with you everything we know plus everything we're working on with

1:44Shayna:our clients so that you have the best chance at reaching your financial goals. We want to help you take the guesswork out of your budget, improve your marriages, and even bring your kids in on the conversation.

1:55Vanessa:We can help you no matter where you're at, whether you're the single mom who's never had$500 in her savings account or the millionaire

2:00Shayna:who's paid off four real estate mortgages. And we're not going to shy away from the tough love. We'll tell you what you need to hear and encourage you at the same time.

2:08Vanessa:This is the Financial Coaching for Women podcast. All right.

2:13Shayna:So Shannon, what is the problem? The problem is that a lot of people are confused when they get their tax return every year. They have no idea what the best way to use it for themselves.

2:21Vanessa:Yeah, maybe they do. I was just thinking maybe sometimes they do, Vanessa, but they don't listen to their better.

2:26Shayna:Like they had a plan and then quickly goes away.

2:29Vanessa:Or let's go to Disney. But I think that it's actually the same with any amount of money. Sometimes people are like, they're like, which priority comes first? So that's definitely a problem that we see. The other problem that we see a lot, Vanessa, is it's gone. It just dwindles away before they even know what happened or what were because they didn't have a plan for it. It just went slowly slipped through their fingers. Yeah.

2:50Shayna:And I think for me that it's like the worst is when it gets deposited. And then maybe a month or two later, you go look in your account and it's back to zero. And you're like, what happened? We had all that money in there from tax return, but you just randomly swiped your card throughout the month. And now you have no idea where it went. Yeah. It's very sad.

3:07Vanessa:It is. Yeah. So I think that happens a lot. Then a lot of times what we've seen is maybe you're using it before it gets here. Like you're putting stuff on credit cards. Right now. and then you're like, I'll pay it off of the tax return later. That's not a great plan. We're not here for that. We do not endorse that.

3:23Shayna:We do not definitely endorse that. And here's why, listen, like you're spending money now because you think you're going to get money in the future or you know that it's coming. So then when your money comes, you're paying for your past and then you're left with zero. That doesn't feel good. Yeah. And it's still just you're behind.

3:37Vanessa:You're like, you're in this behind cycle, which is part of the part for the next problem, which is you're relying on your tax return. Your tax return is like the big part of your budget year. And so that's a problem. We want to change that. We want the tax return to maybe not be like the most consequential thing in your life. Maybe you're your own bank. Maybe you have savings buckets. Maybe you paid off debt. Maybe you have a great financial situation going on. And then the tax return just is a bonus on top of that.

4:03Shayna:Yeah, we want your budget to be so streamlined, so consistent, so automatic that money is coming in, money is going out. And when the tax return comes, you've made a plan for it. You know exactly where it's going. And it's not affecting your monthly, everyday money management. Yeah.

4:18Vanessa:Okay. So let's just real quick, let's talk about what a tax return is. Again, did that little history lesson over dinner. The tax return is the government has saved money for you all year. So kind of them. So kind of them. They just took your money and quietly just placed it in a little place. Maybe they're making a little money off of it. Nobody's fine.

4:36Shayna:I was going to say, so they saved all this money for us. That was so sweet. What did they do with all the interest, Shaina, that they made on all of our money? I feel like they spent it. You think they kept it? I think they spent it. From everything

4:45Vanessa:I can tell, they're spending all of the money all the time. Either way, it is them saving money for you and then you get it back. Okay? What we want for you in general, just so you know, the idea here is for you to be your own bank, for you to do that for yourself. So we'll get to that. But that's what it is. They've saved money and then you get some of it back. It's so great. Yeah.

5:05Shayna:What we want you to do is to decide how to best spend your money. It's your money. Remember, you're getting your tax return back. It's your money. And what we want to figure out is, okay, now that it's coming back, now that we're so thankful that they saved all of it, which we'll talk about that part in a minute, but what do we want to do with it?

5:21Vanessa:Yeah, and this is where using our budget system, budgetvesties.com forward slash budget, you can check that out, is going to really help you out. Because if you have a budget and you've actually looked at what's going on, then you're going to be able to make some really good decisions. So with our clients, we're putting the tax return in their February, March, April budget. We're putting it in there on purpose and we're looking at their goals, at what's happening with them, and where do they want to put it. Either all in one category or maybe they're going to split some of it, but it's based on their budget.

5:49Vanessa:It's based on what's happening. It's based on their goals.

5:51Shayna:Yeah, it doesn't – okay, so let's look at three different options of what you can use your budget for. Maybe debt, savings, or you're going to splurge it, okay? Choosing one of those depends on what your budget says. It's based on your specific financial situation. So we have all of our clients, every single one of our clients is going to treat their tax return differently as they should, because they have very specific goals for their life. And so it's not, it may not all go towards that. Maybe they have a lot of debt, but they're like, listen, we have this big wedding in the keys of one of my clients.

6:18Shayna:Her brother's getting married, decided to do that in the keys that they all have to pay for. So she's got three kids and her husband and we're budgeting for the keys, baby. So listen, her tax return is probably going to be spent a little different.

6:28Vanessa:Yeah. Yeah. And like Vanessa said, the choices are debt, savings, or splurge. And I've had clients do it different ways. So I've had clients that don't have debt, but they actually need the tax return to fund their savings buckets. That's a big deal. We've had clients that are like, hey, we've been buckling down over and over and we've been doing all of this. We want to use this to go on a trip. We want to use this to get that new couch or whatever. Totally get it. Totally fine for it. But it's because they've been looking at their budget and they know what's going on. Also had clients that were like, this is the worst fun I've ever had with a tax return by paying off debt, but I finally could pay this credit card.

7:04Vanessa:It's the final, the only option I was ever going to have to finally be done with it and get ahead and get and make some, put some progress on this bad boy. And then we talk about, it's not every time. Like one time you get rid of this debt and look, you get 300 bucks back into your budget every month. And that's going to feel like a win.

7:20Shayna:Yeah. It's adulting that you're going to feel good about later. Like in the moment, you're going to be like, oh, this is the worst. I could do so many other things with this. But after you pay off all the debt or after you fund that savings bucket for Christmas or whatever that looks like for you, right, you're going to know that is one less thing that you have to worry about, one less thing on your plate, and then you can start looking forward to other things. You're funding your budget and not having to worry about that tax return anymore.

7:42Vanessa:Yeah. So you're going to have to look ahead at the entire year for your budget before you can really make this decision. Like we've said before, we have a lot of clients that rely on bonuses or tax returns to fund their savings buckets Especially the ones that they really want because they can't do it necessarily with their monthly budget That's what you need to look like look at if my monthly budget isn't able to fund my annual bills if my monthly budget isn't able to fund christmas or whatever savings buckets I have deemed that I want I'm going to need to probably put that put the tax return to those first because why if I don't then I'm going to have to resort to debt.

8:15Vanessa:And that's the first tier priority. I want to pay, I want to set this money aside for things that I know I'm going to spend money on later this year

8:23Shayna:so that I don't have to use debt for it. Yeah. And so sit down with your spouse and make that decision together and go, okay, listen, we have this credit card that's$4 ,000. We're getting $4 ,000 back on our tax return. It's 30 something percent interest. We can wipe the whole thing out with this, or we can keep that monthly minimum payment because we can afford that. And we need to do this one big thing for savings that we know is coming up. So we have to do that. There are so many different situations, so many different scenarios that could happen, but you're not going to be able to make any of those decisions unless you sit down and look ahead and make a plan, the best plan for you in your future.

8:58Vanessa:Yeah. So if you look at the savings buckets and you have stuff coming up that you can't afford otherwise from your budget, you need to make that decision first. But like I said, if I've been looking at my budget and we are saving for our savings buckets, like we're able to handle all of these things with our monthly budget. We've got our spending out of control, we've got our savings buckets, then you can very easily look at your debts and say, hey, we can tackle this with this extra money because I don't need it in my monthly budget. I've got the things that are coming up this year covered because I can afford them with my savings buckets.

9:25Vanessa:And then you're going to use our debt tracker and your debt minimum or your debt, maybe even your debt avalanche one, mostly because this might be that you have a big chunk of money. And then you decide which ones can we pay off? One can we pay off? Which one is the most sense making to pay off? You want to look at those different options. And then that probably is going to be, if that's a goal of yours to get out of debt, like Vanessa, to get some of this money back into my budget monthly, then that's probably what you're going to do secondly.

9:48Shayna:Yeah.