Isn't That Rich Podcast

Tax season is right around the corner, and whether you’re expecting a refund or bracing for a bill, now is the time to make a plan. Because if that money hits your checking account with no direction… it has a funny way of disappearing.

In this episode of the Isn’t That Rich podcast, we talked about five solid ways to make your tax refund work for you, plus what to do if you do not get a refund at all and you end up owing. And before we get into it, quick reminder: we are not tax advisors. We are not here to replace your CPA. We are here to help you think ahead, get a plan in place, and feel a whole lot less stressed when the numbers come back.

Also, let’s gently clear something up. A refund is not a bonus. It is your money being handed back to you. It just feels like a bonus because you have been living without it all year, and then suddenly it shows up. That is exactly why it can be such a powerful tool if you decide what it is going to do before it ever lands in your account.

If You Get a Refund, Here Are 5 Places to Put It

1. Pay down debt

This one is not glamorous, but it is effective. If you have a credit card balance, a car loan, or even a mortgage, using your refund to pay down debt is one of the smartest moves you can make. Anything with an interest rate is costing you more money the longer you carry it, which means paying it down is basically a guaranteed return.

Even if your refund is not big enough to wipe the debt out completely, making a dent still matters. It moves you in the right direction, and it reduces how much money you are losing to interest over time. Your future self will thank you.

2. Put it into savings

Simple, but powerful. A savings account gives you options, and options give you peace of mind.

We talked about how life always finds a way to hand you a surprise expense. A roof repair. A hot water heater. A transmission. A medical bill. Something. If you own a home, you already know this is not a matter of if something will break, it is when. That is why a “wear and tear” savings fund can be such a game changer.

Some people do fine with one savings account, but others do better when they separate savings by purpose. Vacation fund. Christmas fund. Emergency fund. Car insurance fund. When every dollar has a job, you are far less likely to accidentally spend money that was meant for something else.

One extra tip we shared: if you are tempted to dip into savings when you see it sitting there, you can sometimes hide certain accounts from your online banking view. Your automatic transfers will still happen, but it becomes more out of sight, out of mind.

3. Put it into a CD

A CD is a certificate of deposit, and it is one of our favorite “middle ground” options. It is a safe place to put money for a set period of time in exchange for earning a higher interest rate than a typical savings account. The key is that your money is “locked up” for a term like 6 months, 9 months, or 12 months.

People avoid CDs because they want control, but here is what many do not realize: you can still access the money if you truly need it. You may lose some interest, but your principal is protected. That means if you deposit $1,000 and it earns $50 in interest, the penalty is typically on the interest, not the $1,000 you put in.

The reason we love a CD for a tax refund is simple. You have been living without that money all year. So if you can keep living without it for a little longer, you can let it make you more money instead of spending it impulsively the minute it shows up.

4. Invest it

If you are willing to take on more risk for the potential of more reward, investing is the next step up.

You can invest through a financial advisor, or you can open a brokerage account and learn as you go. We mentioned that we personally enjoy using Charles Schwab, but there are plenty of reputable platforms available. You can also explore robo-advisors, which use automated strategies to invest based on your goals and risk tolerance.

Investing is not as “safe” as a savings account or a CD, and you can lose money in the short term. But over time, investing is how most people build retirement and long-term wealth. If you do not have an investment strategy at all, this is worth exploring, even if you start small.

5. Give some away

This one matters. There are so many nonprofit organizations and missions doing real work in our communities, and many of them depend on generosity to keep going.

Even if you do not donate your entire refund, consider giving a percentage. It can also be tax-deductible depending on the organization and your situation, but beyond that, giving is simply a powerful way to use money. We always say you cannot outgive God, and we believe that.

Bonus Idea: Use it to start something

A refund can also be the push that helps you start the business you have been talking about for years.

Maybe it is buying your domain. Paying for a website. Upgrading your phone or computer so your content and photos are not held back by old technology. Buying the basic supplies to get your first product off the ground. You do not need a million dollars to start. You just need a start.

What If You Owe This Year Instead?

First of all, you are not alone. Owing can happen for a lot of reasons: side gigs, 1099 income, shifts in withholding, a year with unusual income, or just a curveball season.

But if you owe this year and you do not want to repeat that stress next year, here are the two big strategies we talked about.

Strategy 1: Set money aside monthly

If your financial situation is fairly consistent year to year, a simple method is to take what you owed this year and divide it by 12. Then set that amount aside every month in a separate account. You can even automate it.

The reason we like this approach is because you can keep the money in an interest-bearing account while you are saving. If your employer withholds extra money through your paycheck, the government is holding it with no interest. If you hold it yourself in savings, at least it earns something.

Strategy 2: Create a tax account for your side income

If you have unpredictable 1099 income, a monthly set-aside might not work as well. In that case, we love the “tax account” method.

Every time you get paid from a side gig, immediately transfer a percentage into a dedicated tax savings account. Jared shared that he picked 30% as a simple rule, and the biggest benefit is that it keeps you from accidentally spending money that was never really yours to begin with.

It is out of sight, out of mind, and when tax time comes, you are not scrambling.

Two tools that help

We also recommended two simple resources:

1. The IRS withholding estimator can help you estimate what you should be setting aside.

2. A tax bracket pyramid can help you understand how tax brackets actually work, so the system feels less confusing and less like a total mystery.

And one more option if you want it as hands-off as possible: you can update your W-4 so your employer withholds a bit more each paycheck. This can be helpful if your side income is predictable year after year, and you would rather not manage the transfers yourself.

The point is to plan before the money hits

If you are getting a refund, decide where it is going now so it does not evaporate later. If you owe, make the next year easier on yourself by building a system that creates a cushion.

Because there is truly nothing worse than owing Uncle Sam and realizing you already spent the money.

And if you are listening right now, we have to ask: which one are you doing this year? Just do not tell us you are letting it sit in your checking account until it turns into a hot tub.

If you want help thinking through what option fits your situation best, stop by and talk with us. We are always happy to help you build a plan.