5 Smart Ways To Use Your Tax Refund

According to data released by the IRS, the average tax refund this year will be about $2,900. Without a doubt, you’re relying on that refund to provide a nice cash infusion after a spendy holiday season, so we wanted to give you a quick rundown of some smart ways to put your refund to good use.

However, before we get into those ideas, we want you to make you aware that getting a refund is in no way free money! Hopefully, you know this by now, but the money you’re getting back from Uncle Sam is money you should have had last year. That’s almost $250 extra each month that you basically let the government borrow for free! If you would have put that $250 extra from last January’s paycheck into your 401(k) or Roth IRA in an S&P 500 index mutual fund, you’d be $55 richer today...and that’s just the return on one month’s pay for the entire year! If that doesn’t convince you, the $2,800 average refund from the prior year would now be worth $3,500 if it was sitting in that S&P 500 index fund at the start of 2017! If you’re not in a position to save for retirement, that $250 extra each month could be used to eliminate the need to go into debt.

So, if you’re getting more than $500 back this year, we suggest updating your W-4s with your employer to have the additional amount automatically added to your 401(k). The withholding rates are changing this year as at least 80% of American taxpayers will see an increase in their take-home pay thanks to the 2017 tax reform, so even more reason to update your W-4! You can use the IRS withholding calculator (to be updated by the end of February) to fine-tune your withholding to make sure you maximize your take-home pay. You can also seek guidance from your tax advisor, a local Enrolled Agent or your HR department if you’re not sure how to change your W-4.

If you rely on your refund as forced savings, that’s fine, but use the money wisely rather than splurging on something when you have debt you can pay down or savings that need to be optimized. With that said, below are 5 smart ideas on what to do with your refund.

>>>> Ever feel like you need to detox your money?

5 Smart Ways To Use Your Tax Refund

1.  Pay off/down credit card debt:

According to a study recently performed by NerdWallet, the average household credit card debt is nearly $16,000 and Americans pay an average of $904 in annual interest on the revolving debt. What better way to put the average $2,900 refund to use than to pay down a huge chunk of your credit card debt? If you have balances on multiple cards, pay down the balance with the highest interest rate first in order to save on accrued interest. The good news is that 41% of respondents to a NerdWallet survey say unnecessary spending is what has caused them to rack up credit card debt...stop spending foolishly and put your refund to work!

Use one of our money saving challenges to pay off debt quickly!

2.  Pay off/down student loan debt:

According to the same study, average American household student loan debt is about $47,000. Sure, student loans carry relatively low-interest rates, so your priority should be paying down credit card debt if you have a balance on a card with a high-interest rate, but this is the next area to tackle given the magnitude of the debt. What’s more, this greatly enhances the return on investment you’re getting on your education as you pay down the debt faster than your income level increases...this is finance savvy at its best!

3.  Save for your “rainy-day” emergency fund:

If you don’t have at least 6 months of take-home pay in a savings account, but you are in a good position with your debt, pour your tax refund into your savings account. According to a survey conducted by GOBankingRates.com, 57% of Americans have less than $1,000 in savings...this is great for retailers and banks, but terrible for your wallet! If savings are too low, you can’t handle emergency expenses and are forced to go into debt to fund those expenses. Putting those expenses on your credit cards makes them at least 15% more expensive based on the average interest rate charged (so, a $1,000 emergency expense is actually $1,150 on a credit card if you don’t pay off your balance in a timely manner).

RELATED: 18 Ways to Save $15,000 in 2018

4.  Save for a down payment on a new home or, if you’re not in the market for a new home, pay down principal on your mortgage:

If you know you’ll be in the market for a new home in the near future, putting your refund into savings toward a down payment on your purchase is a certainly another great idea. You should try to save for a 20% down payment in order to eliminate the requirement of wasting money on Private Mortgage Insurance (PMI). PMI is paid to protect the lender in the event of default and never gets refunded to you. PMI is expensive - as much as 1% of the value of the home, so a little more than $200 per month on a $250,000 home. If getting a tax refund is like giving an interest-free loan to Uncle Sam, consider PMI and interest-free loan that is never paid off!

If you are renting with no intention of buying, keep pouring that money into your emergency fund!

Note - if you’re paying PMI and want to learn how to eliminate it - read this!

5.  Save for an awesome vacation:

We opted out of giving an interest-free loan to Uncle Sam long ago, so we like to think of the extra money we get each month as going toward our vacation fund and we’ve taken some amazing budget-conscious trips over the years. If you’re in a great position with debt and savings then bon voyage! Here are some ideas for really cool trips that don’t have to break the bank.

Other ideas:

• donate to charity
• pay off a car loan
• open a Roth IRA
• make an extra mortgage payment, and/or refinance your mortgage

We hope you were able to get some ideas on what to do with your tax refund or how to stop giving Uncle Sam free money, but please let us know in the comments section if you have any questions. Also, share this post with someone that you believe could benefit from it...our goal is to help those millions of Americans that are either in debt or have trouble saving. Thanks for reading!

Detox Your Money: February

How is it already February?! The month slipped right by and we didn't do any yoga! Seriously. But that's okay, we aren't going to beat ourselves up about it. We still have our fitness goals going for the rest of the year, but our focus now shifts to our February challenge - Detoxing our Money!

The entire goal of our Detox Your Life Challenge is to improve a different area of our lives each month. It's okay if we don't accomplish ALL of our goals; however, we will take much pride in tackling the goals we set and use those accomplishments to build momentum in tackling our remaining goals as the year goes on.

Last month, for the Detox Your Fitness Challenge, our goals were to:

• Lift Weights 4-5 days per week (check!)
• Cardio 2-3 days per week (at the end of our lifting workouts) (check!)
• Hike at least once a week (We hiked twice, we weren't able to the other weekends because of the weather but we did add in a couple stair climbing sessions in the gym and some HIIT workouts!  We’ll make up our lost days when the weather improves.)
• Yoga at least once a week (didn't happen...nope...not once!)
• Stretching every day for 10 minutes after waking and 10 minutes after lifting (half and half, we stretched after working out but not much after waking up)

I (Whitney) start week 5 of the She Sweats 12-Week Run Builder next week and Scott will start week 5 of the She Sweats 12-Week Transformation (Yes, men can do "she sweats"!).

Again, just because a new month is upon us doesn't mean that we are going to completely forget about our fitness goals. We will continue with our fitness goals and simultaneously move forward with our money goals!

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Why are we talking about money?

Fitness is a large passion of ours, but financial responsibility and freedom are top priorities and huge passions as well. We both majored in finance in college and continue to be captivated by personal finance. Scott has worked in corporate finance for over a decade now and continues to stay on top of personal finance and investing news. We share a strong passion for helping our community get better at budgeting, saving, investing, and building financial freedom along with living a healthier lifestyle by focusing on pursuing active hobbies and eating healthy.

We're not perfect, but we strive to be as disciplined and responsible as possible by living within our means; it's simple - we focus on the things we need in our pursuit of happiness, not the things we want in the relentless chase for status. Living a balanced life requires saying "no" more than saying "yes". This applies to finance and fitness. It is not about deprivation, it's about self-awareness and control.

Wondering what all of this detox stuff is all about?

Take a look at the concept behind our Detox Your Life Challenge here.

Let's take a simpler approach to money this time, shall we?

Start off the month by reading our post on 18 ways to save $15,000 in 2018! It has a ton of valuable information to help you reach your financial goals. Then, pick one (or two!) of our money saving challenges to try! Getting your finances in order sounds complicated but it's really simple. It not easy but it is simple. The easiest way to get started is by spending less than you earn and prioritizing your goals whether that may be to pay off debt or build emergency savings. How you do that is up to you but we will help guide you along the way!

Check out these money quotes to help motivate you!

So, what will we be working on this month?

• Opening a new savings account to maximize the interest we’re earning
• Categorizing our grocery receipts to help drill-down on wasted expenses
• Reviewing our retirement investments to ensure we’re saving enough for retirement
• Reviewing the new changes to the tax code to identify incremental income that can be poured into savings and take advantage of new opportunities

Looking for ideas for your own challenge?

• Make this month a no spend month
• Build a budget
• Build a financial plan
• Take advantage of free (or low-cost) financial advice through your employer or bank
• Start an emergency fund (ANY amount helps!)
• Cut back on how many times per week you eat out
• Write down every single thing you spend your money on this month (count every penny!)

Need to write down your goals with pen and paper?

We do too! We have a simple printable for you! You can print it in color or black and white and then just fill in whatever notes or goals you need to jot down. Get it here.

Reminder: Make sure you are signed up for the Detox Your Life Challenge emails so that you know when a new challenge is released or we have something fun to give you like a new printable!

Check out these additional resources:

• 18 Ways to Save $15,000 in 2018
• No Spend Money Saving Challenge
• How We Ditched Cable TV
• 6 Simple Ways to Save Money (and Calories!) at Restaurants

Start one of our free Money Saving Challenges:

• Save $1,000 in 3 Months
• 3 Month Money Saving Challenge
• Beginner 6 Month Money Saving Challenge
• 52-Week Money Saving Challenge
• 12 Month Money Challenge
• $300 12-Week Christmas Money Saving Challenge

Get Ready for New Articles to Help You Along the Way

We will come back here and add the links as we publish these posts!

• Small expenses you might miss in your budget
• Ways to build an emergency fund
• What to do with that tax "refund" (and why that's in quotes!)
• Simple finance habits that changed our lives
• Things you keep doing that keep you in debt (and how to get out!)
• How we are debt free but still USE credit cards

February Pucker Up Plank Challenge

Maybeeeee you are like us and don't really care about Valentine's Day but still want to be a little bit festive...or maybe you are all about Valentine's Day. Either way, it doesn't really matter because we could ALL benefit from a stronger core! And that is exactly what this challenge is designed to do: strengthen your core! It was also designed to be something that you do in addition to your normal workout (which is hopefully one of our workout plans!). We have 4, 6, and 12-week workout plans for all fitness levels! Unless you are a total beginner, doing this core workout each day is not a long enough workout for you!

Want to pair this fitness challenge with our finance challenge this month? Get started today!

We are introducing different variations of planks with this 28-Day Plank Challenge. Some you may have heard of before and some you might be scratching your head at. Never fear, we are here to help!

Learn how to do all of these planks plus a few more in this post on how to whittle your waist with 5 different planks!

The picture below shows how to do a regular plank. Keep a straight line from the top of your head to your heels. Your shoulders should be in line with your elbows. Hold your abs in. You can read the other descriptions here.

If you are advanced and this is too easy for you, you can double or triple each day. If this is too difficult, cut the time and/or reps down and work your way up. This challenge is totally customizable based on your fitness level.

Tag us on Instagram and use the hashtag #heandsheeatclean so we can follow along!

We're also including the challenge below if you would rather do the planks listed each day! Your challenge, your decision! :)