When tax season rolls around, most people start mentally spending their refund before the money ever hits their account. You’re telling yourself, “I’ll pay down the card, boost savings, book that trip, and buy a few things I’ve been eyeing.” By the time the refund arrives, it’s already spoken for and often overspent.
In this episode, I break down what I call pre-spending and explain why your tax refund often disappears before it can help you get ahead. I walk you through how fake math shows up, how expected money turns into permission spending, and why your refund rarely delivers the financial breathing room you’re expecting.
I also explain how to use your tax refund as a decision point. You’ll learn how to create space between pre-spending and what you should realistically do with your tax refund.
If you want your tax refund to create financial breathing room instead of a temporary win, this episode will show you how.
In this episode you’ll learn…
[02:15] What pre-spending is and how it quietly overspends your refund
[06:08] How fake math creates a gap between your plans and reality
[10:34] The three common tax refund priorities and why they compete
[14:52] How to write a real plan before your refund arrives
[18:21] The 30-60-90 day spot check that protects your cash flow
[23:40] Why pairing a windfall with a budgeting system changes the next 12 months
Tune into this episode of Money Files to learn how to budget your tax refund in a way that supports your financial goals instead of repeating the same cycle.
Are you ready to start asking for help with your finances? Apply to work with me, and let’s start working towards your financial goals.
If you want to strengthen your budgeting system beyond your tax refund, check out Episode 114 Financial Spring Cleaning: 4 Things You Should Do With Your Tax Refund.
Transcript for “How to Use Your Tax Refund to Get Ahead, Not Just Catch Up”
Intro: Hi and welcome to Money Files. I’m Keina Newell from Wealth Over Now. I work everyday with professional women and solopreneurs to help them get out of financial overwhelm and shame so they can experience more flexibility and ease with their finances. Are you ready to gain confidence and learn to manage your finances intentionally? Tune in and grab financial tips that will help you master the way you think about and manage your finances.
Keina: Hello and welcome back to another episode of Money File. So I hope that you find today’s podcast to be very timely because I want to talk to you about your tax refund. I’ve been on a couple of consults recently and people are telling me tax refunds are coming in and what they’re going to do with their tax refund. So I want to talk to you today about how your tax refund, it’s really a decision point for you. And there are things that we all naturally do when we start thinking about our tax refund. We start thinking about, how can I save this? How can I pay off debt? Maybe I want to treat myself a little bit. And if any of those things sound familiar, you are perfectly normal and you should feel perfectly normal.
So the thing that I want to caution you is, because we start thinking about how we’re going to spend our tax refund, what happens is that we do something that I call pre-spending.
And when you pre-spend the money, you start to mentally talk about the things that you’re going to do with it. And sometimes there’s actual movement of money that can happen before you actually get your tax refund. And so your tax refund, the number you saw on TurboTax or the number your accountant told you, you haven’t even gotten it into your account yet, but you have commitments, right? And so you start thinking about like, oh, my accountant told me I’m getting a $4,000 tax refund. I’m going to put $1,500 of it towards my credit card. I’m going to put $1,500 in savings.
Oh, I’m going to put that thousand dollars, deposit because that’s coming up for my trip to Italy. Oh, and then we need a new grill. I’m going to go buy a grill that’s going to be $500. But you start to make this mental list, you start to talk to yourself. You might talk to yourself about things that you see online. You may have talked to yourself about things that you told yourself you wanted to do this year, but you start to have this mental dialogue of how you want to be able to spend your tax refund. And before you actually even get the tax refund, it’s already spent. And generally it’s overspent. So if you go back and add those numbers that I was talking about, the credit card is $1500, the savings is $1500, the deposit for Italy is a thousand. I’m going to get a grill and it’s $500. You spent $4,500, but your tax refund was $4,000.
And so now we have this discrepancy and when we are pre-spending a tax refund, like that’s why your tax refund doesn’t really go as far as you think it should. Like you are expecting your tax refund to provide you some type of relief, but it’s not providing you relief because you go through this process of pre-spending, which also means that you engage in fake math and you’re deploying expected money even though it’s nowhere in sight, right? And you give yourself permission to spend this expected money and inevitably you overspend because you were spending mentally, if we’re being really, really honest and truthful, you probably added a little something here and there to your credit card that you told yourself, oh, I’ll just pay that off when my tax refund comes. And you added something to your online shopping cart.
And before you know it, the money is already spent and most likely overspent before it actually hits your account because you didn’t circle back, you didn’t actually look at the math, but you engage in this pre-spending process. So there are three common tax refund desires and priorities. So wanting to save the refund. So you might actually want to build your emergency fund or beef up your savings. There’s wanting to make progress towards paying off debt. So you might be telling yourself, I’m going to pay off my car loan, my credit card, I’m going to pay off a student loan. Or there’s also, you just wanting to enjoy it. You want to be able to spend it on a vacation, buy yourself something nice, or maybe there’s a home improvement you want to actually engage in.
And as I stated earlier, all of these desires are completely normal. However, the problem is that we often don’t take the time to actually sit with our competing priorities, because those desires, they really do present competing priorities. And I would also say competing priorities are normal. It’s the sitting part that we have to actually engage with so we can prioritize which of these priorities do we actually want to say are most important to us right now, so that our tax refund, we can actually look back in August, we can look back in November and say, oh, this is how we actually use the money. So if you’ve done your taxes or you’re getting ready to do your taxes or someone you know is getting ready to do their taxes, walk them through this process.
So if you usually get a refund, I want you to budget your tax refund before it arrives. Step one of that process is I want you to write down an actual plan. Like there’s no mental math, I don’t want mental math to be in this equation. I want you to sit down, you can write out how much is my actual refund? Maybe you’re getting $8,000 and you have the actual number. Don’t go off what you got last year, what you got 10 years ago, what your friend got, what you heard you were going to get, but like what is your actual refund? Then I want you to list out all the ways you’d like to use your refund. And here’s where I would encourage you to be honest. Don’t just think about the responsible version of you. If you are someone who you’re like, I really do like to treat myself, be honest about that, right?
Maybe there’s some shoes you’ve been eyeing, some workout attire you’ve been eyeing, maybe there’s like a class that you want to take, a hobby you want to take up. Be honest about those things because when we bring in honesty into our numbers, it takes out the shame and it also is going to help us have better money habits and be able to speak to where is our money actually going. So don’t just say the things that you’re like, I’m going to pay off all of my debt, like that’s the responsible thing. But also if you think about your habits, what are you also going to do? So write that all out. How will you insert your name, use the refund? And assign actual dollar amounts to each of those things when you’re thinking about how you want to use your refund.
If you’re thinking about things you want to buy, if you’re thinking about debt you want to pay off, maybe there are some small debts, like list it all out, get it all out there. And then you can actually run the math. Like how much do you actually need if you wanted to cover all of those things, because I just want you to know that’s the mental math that’s been swirling around in your head anyways. So it’s nice just to be like, oh, I have an $8,000 refund, but what I want to do is like about $11,000. So automatically, now that we have it all out on paper, we can say, oh, okay, we got to adjust. There’s clearly something we need to prioritize. And that’s okay because you’ve had this honest conversation with yourself it’s going to keep you from engaging in $11,000 worth of expenses when you really only have $8,000 worth of we’re assuming are extra funds.
And step number three, I’m calling the spot check because I think that this is a step that most people skip, but it’s something that I do with my clients. You’ve made your wishlist for how you want to spend your money, but I want to bring you back to present day. And I want to ask you to think about what expenses do you have coming up in the next 30 days? At the time that this podcast is going to come out, I want to say it’s going to be like February or March. So if I’m thinking 30 days, if you have kids, it could be spring break, even 30 days from now, like slowly creeping into May and thinking about Mother’s Day, Memorial Day, there’s Easter in April if you celebrate Easter. But what do you have coming up that is going to cost you money that is not on your list of bills?
So going through this spot check is really thinking about what’s coming up that I’m maybe not planning ahead for that I haven’t taken the time to think through. So think through the next 30 days, think through the next 60 days, think through the next 90 days. The reason I take my clients through this exercise is because we can actually use our tax refund to get ahead, like truly ahead and make sure that our budget, it’s like we get to feed our budget so it actually works. Because if you immediately go and do the things on your wishlist, you might find that you are cash flow strapped a couple of months from now because you didn’t actually think through what your tax refund could have helped you take care of.
So let’s say that you’re doing this exercise with me and you’re like, okay, Keina, in May I have an LSAT class, I know that’s going to be $500. I told my mom I was coming home for Mother’s Day, I already bought the plane ticket, but I know I have to rent a car, I want to take her out to brunch. So that’s already like in between the car and brunch, that’s probably a $400 weekend, like me parking at the airport. Like yeah, that’s definitely a $400 weekend. It might even be 5 or $600 if I’m being generous. So maybe I’m going to bump that up to $500 to meet somewhere in the middle. And then you’re like, oh, I got to go back and see my dentist because I just saw him this last week. He told me I needed to come back and finish the dental work in my mouth and that’s going to be another $200. So okay, that’s $1,100 worth of expenses that I have coming up.
Those things might not have been in your wishlist for how you wanted to spend your tax refund. I mean, they’re not sexy, right? But we have to ask ourself these questions because what happens is, if you’re someone who’s like, oh my goodness, I want to make sure that I put my tax refund towards my debt, well then when you need to pay for your LSAT class, when you have to go pay for your rental car and you’re paying for brunch and you’re paying for the filling, you’re going to feel really defeated when you go and charge $1,100 worth of expenses on your credit card. I don’t want you to just clear debt to put debt back on the credit card.
And it might sound counterintuitive, but the reason that I want you to fund the Lsat, the reason that I want you to fund the weekend trip and I want you to fund the filling is because I want you to already have that money set aside for those expenses so you don’t feel like you are deflated and like you can’t get ahead when you go and put these expenses back on your credit card. Like this is actually you taking care of future expenses so that way the credit card payments you’re actually making help your credit card go down month to month. So we don’t want to have a false sense of a win, but then in 60 days from now, we no longer experience as a win because we didn’t take the time to walk ourselves through and to plan ahead.
And this is like the exact thing that I do with clients to actually help them budget for the last time so that they’re paying off debt consistently and they’re not feeling like things are just popping back up. It’s how can we use your tax refund to actually get ahead and not just feel like we’re getting out of a squirmy situation. So a tax refund can help your budget become operational, it can help you fill in the gaps for things, it can help you with things that are coming up in the future. And like I said, it might not feel as satisfying as seeing your credit card balance go down, but it does mean that you’re going to actually have the cash flow to handle the expenses that you have coming up without scrambling, without feeling like, oh my goodness, I have to pull from my savings and without putting things back onto your credit card that you just paid down.
So when you use your tax refund to get ahead of your expenses, you’re not just spending it wisely, you’re actually building a buffer that’s going to change how you get to budget for the next three, six, or even 12 months. And that’s what we want. We want a system, we want something that changes your existence. We don’t want you to just keep doing the same thing again, I don’t want you this time next year thinking, oh, I got to use my tax refund to save some money to pay down debt. I want you hopefully, I don’t even actually want you to have a tax refund because it’s really just a free loan that you give to the government. But that’s a whole nother podcast for another day. So let me be clear, paying off debt is a good way to use your tax refund. I’m not saying that you shouldn’t pay off debt with your tax refund, but if you throw your entire refund at debt and then you turn around and you charge $1,100 to your credit card in May because you just don’t have that cash flow for those expenses, you aren’t going to feel like you’ve actually made progress.
You’ve just moved the money around. And so that’s why I think it’s so important for you to actually pair your tax refund with a working budget. Your tax refund is a one time event, but your budget is a year round system that should be operating and supporting you. Remember, I want you budgeting on a 12 month cycle. That’s what I want. And so when you have a 12 month cycle budget, you are thinking about things in advance. And when you pair this windfall with this working budget, you’re not just deciding what to do with $4,000 or $8,000 or $3,000, you are deciding what to do with the financial breathing room that this $4,000 can help you create for the next 12 months. And if you’re listening, you’re like, Keina, I don’t have any debt or I can’t think of any expenses that are coming up, then you can use your tax refund in a different way.
I tell people like, think about your financial goals. How do you want to support your financial goals? Do you want to do 50%, I’m going to put towards my emergency fund? 30%, I can just have fun with it. 20% of it I might actually put into auto savings, like if I know I want to buy a car. But if you get nothing else from this podcast episode, it’s really for you to stop and pause before you do the thing that you’ve always done with your tax refund. What do you actually want your tax refund to create? And chances are that you’ve done the same thing with your tax refund for the last 5, 6, 7 years, but you aren’t actually creating a different result. And the reason you’re not creating a different result is you’re not actually thinking through how can my tax refund get me ahead and not just get me out.
I don’t want your tax refund just to be something that you’re waiting on to make sure that you can take the trip. I don’t want your tax refund to be something that you’re waiting on just to pay that credit card down again and to re-charge the credit card back up and you’re right back in the same place 12 months from now. That’s not the goal. If you have a tax refund and you have that opportunity with that windfall of money, I want it to be something that pushes you forward and it advances how you are able to do money this year. That’s what I want for your tax refund. So before your tax refund arrives, make sure you’re doing these things. Make sure you’re writing down the exact amount that you’re getting, actually sitting down and writing down like what am I hoping to do with my tax refund?
And you don’t have to censor yourself, like write everything down, I’m not going to check it. But if you can’t be honest with yourself, then you can’t be honest with anybody. And then the third thing is, it’s like really looking at how much am I saying that I want to spend? But then also how can I use this tax refund to push my goals and to make sure that I have cashflow this year, that I have cashflow in the next 30, 60, 90 days. That’s what I desire for you. And I’ll tell you that if you’re listening to this and you’re like, Keina, I do the same thing with my tax refund every single year. I wrote an email a couple weeks ago if you’re on my list. And I was like, you should actually give me your tax refund, like you should use your tax refund to invest in coaching.
And the reason I say that the overpaying off debt, over putting it in savings is because you’re investing in a skill. I’ve had clients that I’ve worked with and when we’ve come to tax refund season and if they get a tax refund, they’re like, Keina, this is the first time that I’m not using my tax refund to pay down debt. This is amazing. I can actually put it all in savings or I get to do something fun with it and I don’t have to feel guilty about it. But using your tax refund to invest in coaching, I would say is another phenomenal way to use your refund. And it may sound counterintuitive, because I’m like, no, I’m supposed to save it. I’m supposed to. But if we’re not actually changing the system underneath your attempts to save or changing the system underneath your attempts to pay off debt, you are not going to experience change.
And I want you to budget for the last time in 2026, I want you to be able to save money. I want you to be able to pay down debt, I want you to be able to invest, I want you to do all of those things automatically. So if you’ve been on the fence, this is your wake up call and I would encourage you to go to the link in my show notes, apply to work with me, or you can go directly to my website@wealthovernow.com. Book a call with me. We’ll have 60 minutes and we’ll talk like it’ll be a friendly conversation, but I’ll tell you exactly how I think I can help you. You can share with me, what are the things that keep you up at night, what are you worried about when it comes to money, and where do you want to be at the end of this year?
And then I’ll tell you exactly how I think I can support you and we’ll make a plan from there. And together we’ll decide does coaching make sense for you? Does my five month coaching partnership, are you the right fit? So just remember your tax refund doesn’t have to disappear into thin air, doesn’t have to leave you like wondering where your money went. If you actually sit down and budget where your refund is going to go before it arrives, you’ll be able to take control of knowing exactly how your tax refund is supporting you this year. And I want that for you. So thank you so much for tuning in. Have a great week and I will see you next week on the next Money Files episode.
Outro: Thank you so much for listening to Money Files. If you’re ready to take the next step to reach your financial goals, head to www.wealthovernow.com/appointment and let’s get started.
