Are you expecting a tax refund soon? If you’re like most Americans, you’re probably expecting somewhere around $3,000 to show up in your mailbox over the next months. Receiving a refund check has become a strangely normal piece of financial planning for Americans – we count on receiving that extra cash and plan to spend it.
But your refund check is just your own money going back into your pocket. I recommend you adjust your withholdings for the next tax year so you can have more money in your hands every month instead of lending it to the government interest-free all year. And if you are planning to receive a refund this year, here are 7 better ways to use it!
Saving is not only critical to getting out of debt and building a stable financial future, but it’s also an essential part of stewardship. Saving does not represent a lack of faith, it reflects the heart of a faithful steward. Planning to care for your family, disciplining yourself to create financial margin, and balancing your savings are all opportunities to honor God and experience His blessings.
We recommend you make your first savings goal $1,000; then work your way to 3 months’ worth of your living expenses; then 6 months’, and finally 12 (you can track all these goals on Crown’s Money Map). If you’re working to reach any of these savings goals, commit to depositing your refund check directly into your savings account. According to a survey, 43% of Americans are planning to do so!
2. Pay Off Debt.
Barely second, 42% of Americans are planning to use their refund to pay off debt. As Proverbs says, the borrower is slave to the lender, so using your refund to pay off debt can help you break the chains of financial bondage and debt.
If you’re specifically dealing with credit card debt too large to be paid off by your refund check, I want you to get in touch with our partners at Christian Credit Counselors. They specialize in helping people pay off their overwhelming credit card debt and can walk you through the process of becoming debt-free.
We also have debt-help resources available for you to create an efficient payoff plan. Go through the 5 Steps to Debt-Free Living video course (it’s free) to get access.
Giving is a material expression of our spiritual obedience to Christ. It’s our way of acknowledging that God is the owner and provider of all we have and that we are His stewards. It’s described in the Bible as a practice that will bring overwhelming blessings and gifts to our lives. Yet we are out of practice and undisciplined when it comes to obeying the Scripture.
Jesus said, “It’s more blessed to give than to receive.” (Acts 20:35)
He also said, “Give, and it will be given to you. A good measure, pressed down, shaken together and running over, will be poured into your lap. For with the measure you use, it will be measured to you.” (Luke 6:38)
Giving requires an emotional sacrifice of forfeiting ownership. It propels us into a freedom found in exercising faith, by believing God will use our gift and supply our need. Be sacrificial and commit your refund check to your church or a reputable ministry that has impacted your life.
4. Build a Nest Egg.
Not saving enough for retirement soon enough is the number one regret of older Americans. As more and more people realize that their dreams of a Floridian retirement are decades of saving short, remember that you are saving to be used by God, not to live a life of leisure.
A detailed, disciplined retirement savings plan is important to have financial freedom. Research what kind of retirement account and investing strategy best suits your age, family, career, and future needs and then be disciplined to save. Adding your entire refund check to your nest egg will help ensure a stable financial future for you and your family so you will be free to be used by God.
If you have at least 3-6 months of your living expenses saved, no debt, a habit of disciplined and generous giving, and a growing retirement account, then consider using your refund check to invest.
The Bible does not condemn investing and Christians should see it as an opportunity to increase their impact for the Kingdom. The stock market’s volatility this year has been in recent headlines, so be cautious and patient to do your research and seek wise counsel. With the right strategy and patient timing, a $3,000 refund check could yield you much greater returns later.
6. Prepay Your Mortgage.
Avoid wasting money on interest on your home’s principal by using your tax refund to prepay your mortgage. Throw a portion of or your entire refund check directly towards your principal balance on your house and shave months off of your loan! (Be sure to specify that you want to pay towards your principal when you make the deposit. Otherwise, a large portion could still go to interest payments.)
7. Spend to Save.
There are some things that you should spend money on to save money. For example, my wife and I are diligent about keeping our cars well-maintained and routinely spend money to rotate our tires, change our oil on time, and care for our vehicles.
Take care of your home, your vehicles, and your appliances by using your refund check to pay for updates and maintenance. It may not be an exciting use of your money, but it will pay off in the long run.
By Chuck Bentley, Crown Financial Ministries