Smart Money Moves For Your Tax Refund

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It’s tax season! You know what that means. The question you’re thinking is… “What is a smart decision with my tax refund” and like most things my answer is… It depends. However, there are formulas that I use and today we’re going to get into what this looks like. So let’s do this!

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Podcast Keypoints
0:00 – Episode Overview
2:39 – Formulas For When Receiving A Chunk of Money
3:35 – First Priority – Giving
6:39 – Bills
7:21 – Contingency Fund – What Do You Need
8:47 – Annual Expenses
10:02 – Paying Off Debt & Settling On Medical Bills
11:16 – Investing In Your Business
11:46 – Prioritizing You – Do Something For You And Your Family
12:29 – Breaking Up The Categories
13:29 – How To Treat Yourself Responsibly
14:35 – Recap
15:24 – Challenge

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It’s tax season. You know what that means?

The question I hear all the time.

What’s the smart decision with my tax refund?And like most things, when you ask the answer is,it depends. However, there are formulas that I use, and today we’re going to get into what this looks like. So, let’s do this! Welcome to the Your Money Your Life podcast. I’m your host, Aimee Cerka. After my husband and I faced three major financial roadblocks in the last six years, I felt like I wasn’t doing all that I could and I had let my family down. It always felt like life was a struggle like I had to work harder than everyone else. It just came easy to them, and I didn’t feel worthy of success. Until, a coach helped me see the successes in our experiences instead of our failures. This allowed me to create and implement systems to grow our network by 200,000+ while spending time with my loved ones and on my priorities. Now I help motivated women create the happiness, family life, financial security, and long-term wealth they deserve. If you’re ready to eliminate stress, struggle, frustration and guilt within your finances, you’re in the right place. Welcome, I’m so glad you’re here! Welcome back to another episode of the Your Money Your Life podcast. I’m your host, Aimee Cerka. We’re talking about tax refunds and smart money moves to make with your tax refund today. Okay? Let’s just get into this. There are different formulas that I’ve used in the past, when it comes to receiving a chunk of money. So, we’re using the tax refund here as an example. But this really can apply, we’ve done this while you’ve gotten stimulus checks, we’ve done this, when we receive, you know, unexpected refunds in the mail, or some sort of larger disbursement of money, maybe an inheritance or something. All of those things. Now, of course, some of those situations, there might be tax obligations involved and always check with your CPA, if you have any sort of concerns when it comes to that, but let’s talk about tax refund. So, uh, for myself, it is always a priority for me to give 10% of our income that comes into the household. Now, you know, that 10 cents on every dollar that comes into my company here is given to Operation Underground Railroad to help fight against child sex trafficking. And that is like gross revenue, that’s not profits, we do that off of our gross revenue. But we also have, my husband has a job as well, so we have the income there. With his income, because he is currently a W-2 employee, we do give off of a gross amount. So if you give off of your net currently, this is the distinction we need to make first, okay? So if you give off of your gross amount, when you get your tax refund, you technically have already given on that money because your tax refund is basically just a loan that you’ve given to the government for that time. Now, there are some situations with you know, your credits and everything that you get. You can have more money coming to you in a tax refund than you paid in taxes throughout the year because of credit so you can be eligible for in things. So that’s something else to consider too. But if you’ve given off of a gross amount throughout the year, you technically already gave 10%. Now for me, it is something that I still do. I still give 10% on my tax refund and those chunks of money though those things that come to us, there is a reason for that. A lot of it has to do with the mindset behind it, and in a couple episodes, we’re going to get into the unstoppable force behind giving money, or unstoppable momentum that you create when you are giving money. So we’re just going to kind of table that there for a second, okay? For myself, I always do 10% to giving. Now of course, this is going to be up to you and you notice it’s percentages so it works no matter what the income is right? 10% to giving. Now, the other 90% is kind of where it depends. So I’m going to share with you some categories, some smart things that you could do with this money, and then you’re going to have to make the decision on what’s best for you. Now, of course, if you are a platinum member inside Money Masters Inner Circle, and you want to chat through this and work through this on your specific situation on our one-on-one call, we can absolutely do that. And if you’re not a platinum member, you can use, jump on one of the group coaching calls and ask questions in there. If you’re not part of Inner Circle, it is currently closed for enrollment, but I will put a link in the show notes so you can check it out because that is the place to be, especially right now because I’m getting ready to revamp it. And while it’s under construction, you get like the best deal possible. And if you join us now, after it’s done going through construction and a new stay a member, you still get to be honored into the under-construction pricing. So just something I would check out if I were you. But okay, let’s do this. The first thing that I would consider when you get your tax refund is paying for past due bills. So, if you have bills that are past due that, maybe we had something come up, I know if you’ve been sick or you got behind on bills, and you’re in a spot where you’re not where you’re like right now, with your finances and your monthly bills, this very smart move, just get caught up late fees, all of that we don’t want there to be any problems. If you are past due and in a space where things are tight, I definitely would be reevaluating my monthly expenses. But past few bills, great use of your tax return. The second would be funding your contingency fund. Now, like we’ve talked about, a lot of people call this an emergency fund. I don’t like to plan for an emergency, we plan a contingency. So with your contingency fund, at a minimum, you need to have one month of emergency expenses, like emergency, what you need for your emergency expenses available in cash. We got into this completely inside Budgeting Simplified, there’s a calculator there that you have to help you figure out exactly what that number is. It’s not just your monthly bill number, and it’s not your “everything that you’re spending on a normal basis number”. But at a minimum, one month. We talk in there; I do not find it practical anymore to have three to six months’ worth of those funds sitting in an emergency fund / contingency fund somewhere. With the rate of inflation, it’s just not smart, you’re losing too much money, but I would have at least one month. And then we talk about having those other months available, but in different levels of assets. And again, we get into all that inside the Financial Security Calculator inside Budgeting Simplified. So if you’re like, wait a second, I got questions. I’ll include resources for you on that one as well. Funding Your contingency fund at least one month, that’s another smart move to make with your tax refund. Third thing that you could do is saving for annual expenses. Now annual expenses, I’m pretty sure we’ve talked about this too. If not, we need to dive into this. But annual expenses are the things that come up on a regular basis, just not monthly. You know, back to school stuff, holidays, car repairs, regular car maintenance, car registration, homeowners’ association dues, homeowners’ repairs, pest control, chimney cleaning, we had them come out not that long ago, new clothes for the kids. If you’re like mine, they are growing like weeds and we have to constantly go buying new clothes, extracurricular activities, all the things that we have to take care of and honestly, these are the things that break budgets because we do not have a separate designated fund for them. So, you need to have a savings fund for your annual expenses. And quick side pro tip, it needs to be separate than your contingency fund. Okay? So, saving for annual expenses is smart, getting ahead, getting to the point where you can pay cash for Christmas or whatever other holidays it might be. Putting that money in savings is great use of your tax return money. Something else you can do, so you got what fourth idea here: paying off debt. This is typically the time that I reevaluate, look what I’ve got, is there something that I can put a chunk of money towards and pay it off? Can I settle, if you’ve got medical bills, you probably know by now that I’ll tell you that call and offer to settle with them. When you’re calling offering to settle with them always offer 70%. They don’t always take 70%. But if they would take it and you offer 80, they’re not going to tell you no. So always offer 70%, they will come back and tell you what they can take, it is still a good deal for them do not feel like you’re ripping them off because typically they only make pennies back on the dollar anyways. So paying off debt and a chunk, it doesn’t have to be a medical debt. But if you can knock out that chunk of debt, if it’s a credit card and you’ve got more monthly, your monthly expenses are going to be able to go down, you’re going to be able to use that for your debt roll down. It’s that much more powerful. But that’s another good use of your tax return money. And we’re gonna talk about like how I break this up and how I decide how much goes to which category here in just a minute, when we get through my list here. Next thing you could do be investing in your business. And we’re going to talk again, in a couple weeks, I’ve got it on the schedule here about having a business, having a side hustle and the benefits and cons that are both sides of the picture. But if you have a business, and you need to invest some money into it, using your tax refund can be a great chunk to do that as well, great use of it because it’s a smart investment. We’re not just throwing it away on a brand-new TV. But the last thing here that I’ve got on my list that you can use for your tax refund, that’s smart is something fun for you and your family. Now I’m not, we’re gonna get into the percentages here in a minute and that’s going to play a key I’m not telling you just like to go blow it all on a new TV or a new bag or any of those things, okay. But especially if you’ve been in a really tight, tough time, we’ve talked about the importance before about having a positive money association, and feeling good about money. There is a validity in doing something for you, especially if you’ve been in that situation. So if we’re talking percentages, like I said I know we do 10% towards giving, so we’ve got 90% left. Oftentimes, what I’ll do is I’ll break it up between, I don’t know, maybe two or three of these different categories. Let’s say we’re going to put 30% towards funding contingency fund or funding annual expenses, funding some sort of savings account, it’s typically a chunk that I use, because I like to use those to get ahead. And then the monthly that I’m adding to it isn’t like yes, it’s still necessary, but we’ve added that chunk in there. Okay, so let’s say 30%, adding towards either on annual expenses or contingency fund or a vacation fund or something like that, 30% towards paying off debt and then 30% towards or here, let’s do 25% for investing in your business, and then you have 5% to go do something for you. Again, it doesn’t have to be this big, elaborate thing. It can be something small, but it needs to be something fun, something that you don’t normally do. Maybe you just go out to a nice dinner restaurant that you don’t only do maybe you get a sitter, maybe you will get a massage, whatever it is, something that you feel good about. Something that you want, not something that you need. I know I’ve got you out there, you’re really like me, like, or like I used to be, I’ve gotten better at this, that we really don’t get ourself stuff. Like people ask what we need for what we want for Christmas and I’m like, “Oh, no. I kinda like, I mean I got what I need. I don’t really like meet anything”. Now of course everybody always comes up with like these great things to give us but we don’t necessarily have like that massive wish list of all these things that we want to do. We got to come up with something. Is it a massage? Is it just a nice dinner? Is it a movie out? Whatever it might be, whatever is going to fill your bucket, whatever is going to make you feel good, that’s something that you do. So, I think that about covers it we got Smart Money Moves for your tax refund. I’ll quickly recap the categories for you. And then we talked about within the categories you’re going to use multiple of these, create the percentages. If you’re struggling with what would be a smart decision for yourself, Money Masters Inner Circle, best place to be. We’ll get to that in a second. Let me recap, so (1) paying for past due bills, (2) finding your contingency fund, (3) saving for annual expenses, (4) paying off debt, (5) invest in your business, and then finally, (6) doing something for you. And you’re going to come up with a combination of these, whatever the percentages are for you. But your challenge today is I want to hear from you send me a message on Instagram @aimeecerka, and let me know: Was this helpful? Do you feel better? Do you have a clear strategy on what to do with your tax refund now that we’ve talked about this? I will see you next week for another episode of Your Money Your Life podcast. Bye for now! Thank you so much for listening to the Your Money Your Life podcast. My favorite place to hang out is on Instagram. You can find me at @aimeecerka. Send me a message or post a screenshot and tag me! I love hearing from podcast listeners. When you’re ready to master your money, go to https://workwithaimee.com. You and I will work together to ditch financial stress and struggle for good with a customized plan that works for you, your goals, your priorities, your life. I’ll see you next time on the Your Money Your Life podcast. If you love today’s episode, make sure to subscribe wherever you like to listen to podcasts. That way you’ll receive new episodes right when they’re released, then leave a rating and review. It helps amazing people just like you find the show faster. We’ll see you next week!