Tax refund spending without buyer’s remorse

If you’re expecting a work bonus or tax refund, there’s no shortage of ways to spend it. Here are four tips that don’t come with regret attached.

According to the IRS, the average federal tax refund in 2023 was $2,878. If you’re expecting a tax refund or a work bonus, it’s wise to plan before it arrives.

Joanne “Jo” Ching, HawaiiUSA Senior Financial Wellness Partner and Certified Credit Union Financial Counselor (CCUFC), shares her top tips:

Kickstart your emergency fund. If you don’t have the minimum $500, now is the time to begin. Like fitness, goals may vary but the disciplines are the same for everyone. Develop the habit of regularly contributing to your emergency fund, until you reach at least 3 months’ expenses.
Pay down high-interest debt. Prioritize paying off high-interest debt to reduce overall debt exposure and free up cash flow. If you prefer to focus on paying off debt with low balances first, that’s an option. The key is to choose an approach and commit to it.
Make investments. Consider investing in retirement accounts, college tuition funds, or home improvements. Investments with a good return on investment (ROI) can help grow your wealth over time.
Save for a financial goal. Allocate funds towards personal financial goals like a home down payment, family vacation, or tuition. These goals may not always yield monetary returns but can enhance your quality of life and create lasting memories.

Is spending allowed? “Absolutely!” says Jo. “Rewards and fun are 100% allowed, just set wise boundaries. Consider splitting your funds between one of the goals above and a fun family activity, for example. Avoid regrets by being intentional and setting expectations ahead of time.”

What about your employees, adult kids, or other sphere of influence?

Start the conversation with a talk-story approach. Money doesn’t have to be an uncomfortable topic; we all deal with taxes, after all.
Encourage them to seek professional advice. A local credit union, financial advisor, or financial coach could offer trusted guidance.