The Better Budgeting Podcast

Is It Tax Refund Time?

• Danielle Reese • Season 3 • Episode 21

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This episode emphasizes understanding your financial relationship with tax refunds and how to strategically manage them for long-term gains. By balancing savings, debt reduction, and personal enjoyment, listeners can transform tax season from a stressful obligation into an opportunity for financial empowerment.

• Importance of staying updated on tax deadlines 
• Mindset shift on taxes and view them as a reflection of income 
• Risks associated with large tax refunds and impulsive spending 
• Recommended breakdown for managing tax refunds: 50% savings, 30% debt, 20% fun 
• Aligning financial decisions with personal values and enjoyment

Danielle is a money coach helping women and couples who have been trying to figure out their finances FINALLY create a clear plan so they don’t have to worry about waiting to refill their bank account the next payday.

She is the founder of The Financial Freedom Society on Facebook and her signature money coaching program, The Better Budgeting Playbook. You can sign up for her newsletter by clicking here.

Take the first step towards financial freedom and sign up for a complimentary assessment call with me, Danielle Reese.


Grab your copy of "Let's Talk Groceries" Your Guide to Reducing Your Grocery Bill" This is an ebook with over 30 pages of tips, tricks, and guidance to help you save hundreds on your grocery bill!

Sign up for the early release of The Better Budgeting Blueprint for $99 with a $50 refund once completed. The release is scheduled for April 1st 2025.

You can connect with her on Facebook or Instagram.

Speaker 1:

Hello and welcome to the Better Budgeting Podcast. I'm your host, danielle Reese. I'm a money coach and the founder of the Better Budgeting Playbook, and this is my one-on-one coaching program for women and couples who have been trying to figure out their finances, finally create a clear plan so they don't have to worry about waiting on payday anymore. I became a money coach in 2020 after paying off over $60,000 in debt, rekindling my marriage, becoming financially free and wanting others to experience the same. If you'd like to work with me, you can check out the link in the show notes there. Also, we have the Financial Freedom Society on Facebook. It's a free Facebook community focusing on debt payoff, saving strategies, budgeting and money mindset. You can find the link to that community in the show notes as well.

Speaker 1:

Hello, hello, hey, how you doing? It's been about two weeks since I released an episode, and it's funny. The episode that I'm going to share with you today is actually partly pre-recorded, and in the very beginning of it, I am telling you that I've been sick for I don't know, it was a week or two weeks, and from there things just snowballed. Oh, did they ever? So? I was very sick and I thought that I was getting over something I wasn't. I was continuing to be sick over the course of the week and my daughter's birthday was coming and we decided that mom and daughter were going to take a Disney trip. So I am just slamming down all kinds of things Elderberry syrup, dayquil, I'm making concoctions of all types of citrus and ginger to get as healthy as possible, and eventually I just needed to stop and just lay in bed for an entire day in which I did, and I started to feel much better. And I started to feel much better.

Speaker 1:

Other things that had happened is the Better Budgeting Playbook really boomed in January. I mean, we accepted a lot of new clients, which is really, really exciting. I love being able to help people, but when you're onboarding a lot of people and then you're sick and then also, my daughter had swimming she had back to back meets. I think she had three meets in January which were all weekends. And then, on top of that, my daughter had swimming. She had back-to-back meets. I think she had three meets in January which were all weekends. And then, on top of that, my son started baseball practice, which is a whole nother level of leaving rec ball and going into the travel ball world. So it was just mayhem for two weeks. So forgive me for not releasing an episode the last two weeks, but I am going to release the one that I was recording when I was sick and I had to stop mid-record.

Speaker 1:

But before I do that, today I released my very first ebook and it is all about groceries. It's called let's Talk About Groceries your Guide to Reducing your Grocery Bill, and this is a almost 40-page ebook. I mean I'm laying it into you, all All the tips and the tricks that I know about reducing a grocery budget. I'm putting it out there for you. It is super, super helpful. I give all of my clients early release access and they love it. I decided on releasing this ebook because it was really a topic of discussion.

Speaker 1:

Every single time I met with new clients, what we do is go through a bank statement exercise. In there they get to write in all of their transactions for the grocery and every single client comes back and is like is astronomical, and we waste food, we throw away food, we go out to eat. Why is the grocery bill so high? And I address all of that. I address the psychology behind it, I address couponing and meal planning and I address creating a realistic budget for the grocery expense, because when you got two toddlers at home and it's just you and your husband or your wife and you have two teenage boys at home, those are very different grocery budgets, right? So that is going to be in the show notes. Listen, you got a limited time deal. It's only $12. You spend more if you go through the drive-thru for Chick-fil-A. Just for yourself, it's only 12 bucks. Y'all. Go into the show notes, grab your copy. After February 28th it's going to jump up to 22 and that's going to be the price set for it. So introductory price 12 bucks. Go grab your copy.

Speaker 1:

I'm telling you it is jam packed with so much information. So grocery shopping, grocery bills, is like a huge thing for you that you struggle with and you spend a lot of money on. That grocery guide is going to guide you right through everything that I know. I also want to add that I worked in the grocery retail business for eight years. I know a lot of stuff. I know so much stuff. I also worked for almost seven years in food distribution, so I know a lot about inventorying and I know a lot about purchasing and unit pricing and a lot of things that are also in there. On top of that I know I sound like DJ Khaled right now and another one, but I also went to culinary school, so I learned how to cook. I went into grocery retail I'm learning that side of the business and then I also go into food distribution, which is a whole nother sector of knowledge. All of it is jam packed in there for you, so it is a really awesome guide. Grab it for $12 until February 28th. Jacks up to 22. And that's what it will be here on out until I decide otherwise.

Speaker 1:

I guess let's get into today's episode, the one that I recorded when I was a little bit sick and I actually had to finish the episode, which is what I'm doing today. As I'm recording the intro, I'm going to kind of cut and splice and things, because here's the thing, y'all, I am not a perfect person and I do not hold myself to be a perfect person, and I think that's really, really important for me to share because I'm relatable. All right, this is not some pristine show or anything. I got sick. A bomb basically went off at home, where we're just running all over the place, and I just couldn't get another episode out. But here we are. We're going to splice everything together for you and finish it off, and I hope you enjoy this week's episode.

Speaker 1:

Welcome back to another week and another episode of the Better Budgeting Podcast. I'm a little bit nasally here because I was real sick last week. I swear to you, I have been sick probably five times since November in some form or another, and it's weird because my kids are never getting sick. We go homeschool and all of a sudden I'm getting sick all the time. Maybe it's because I'm spending so much time with them. I don't know, but today is January 31st, 2025. And if you are living in the United States of America, this episode is for you specifically, because I don't know no tax codes or know nothing about taxes in any other country. But for January 31st, that is the deadline for W-2s to be processed and sent to you. They can still come in the mail after as long as they're post dated by the 31st, and what that means is more than likely. That's it. That's the last little puzzle piece. You need to go file your taxes. So you're either feeling like yay or ugh when it comes to tax season, and I'm a numbers girly.

Speaker 1:

I've always enjoyed tax season. I've always enjoyed paying them over the last two years as a business owner, which is a really odd thing to say. A lot of times you'll hear people complaining about taxes and paying taxes, or how much taxes are coming out, and I don't know. I just feel like, if I want more money, yeah, I'm going to pay more taxes, but I got more money. Then I just earn more money, yeah, I got to pay more taxes, but I still get more money, right? I don't really associate with the mindset of I don't work more, so I don't make more money, so I get in.

Speaker 1:

I don't get into a no tax frame, I don't know, I don't care about that. Like, make as much money as you want, all right, and then let the taxes be what the taxes are. You can always get deductions for the taxes. But I'm an oddball Okay, I'm an oddball when it comes to taxes. But let's be real.

Speaker 1:

There's a lot of feelings around taxes, is it? You know, did I save enough? Will I have to owe? How much am I going to get back as a refund? And first off, if you're going to get a massive I mean a fat, massive refund then it's time to update your W-4. That is the form that tells you how many deductions it's kind of like an estimate for your taxes for the year and it tells your employer how much you want them to take or withhold for your taxes. And most people they let that just be what it is, a standard, right? I'm going to take no deductions and I'm going to, you know, be as normal as possible. And the thing is like if you get children, you have a child deduction. Right, everybody gets a child deduction if you have children under the age of 17. So I highly recommend updating your W-4.

Speaker 1:

And here are two reasons you don't want a big fat tax refund. One is you lose out on money year round. Okay, the average tax refund in 2024 was $3,000. Okay, $3,000. That's $250 a month back into your pockets, back into buckets. Isn't that crazy? And the thing is it's not taxed. It's not taxed because it's already been taxed. That's the tax that's going to the government that you don't owe them. So definitely losing out on money year round.

Speaker 1:

And number two is that bad habits lead to bad decisions. Right, bad habits lead to bad financial decisions. And this means the bigger lump sum, the more opportunity for bad decisions. So if you notoriously get your tax refund as soon as possible and you are out of it by April. You have no money left by April. You don't want this anymore. You don't want that big fat refund anymore. You're the type of people that are saying I have no idea where all the money went, and getting a lump sum of cash is not the best option. Okay, it's easy to find something shiny to spend it on. It's easy, so easy. And getting money back into your pockets, paycheck after paycheck, is going to help with sustainable growth.

Speaker 1:

Think about people who win the lottery. So many studies have been done with this and there's a lot of statistics out there, and what I found is 70% of lottery winners end up bankrupt within five years of receiving a large financial windfall that comes from ryanhartorg. So let's talk about that a little bit. This article also decided to put some statistics out there on how do lottery winners actually spend their money. And 37% invested in stocks, bonds or real estate. 17% of winners used the money to liquidate debts. 23% of winners used the money to buy a house. 20% used some of their winnings to remodel their house and 37% used lottery winnings to take a vacation.

Speaker 1:

All right, here are the things that I want you to notice. The very first statistic was 37% invested in stocks, bonds or real estate. The last statistic is 37% used lottery winnings to take a vacation. One is to build wealth and one is to take away wealth. Right, and most of us are going to fall in that 37% of winning and going on vacation. Right, I'm hoping that some of y'all are going to liquidate some debts at 17% of winners here. You know these don't add up to 100%. So I got into a little bit more digging and some people did multiple things right. They paid off some debt and they went on vacation, or they invested in stock and they took some money and they remodeled their house. But the point is, a majority of lottery winners spent more money than they did investing it.

Speaker 1:

And I think that is such a great habit to highlight and bring over to the tax refund season, Because so many times I talk to people, I get a large influx of people that come in near the beginning of the year because they get the tax refund and the money and stuff and they all tell me it's gone by April. It's gone by April it's because there's a habit attached to it. There's a habit attached to it and also you don't have a solid plan to either pay off debt and stay out of debt or to put money in savings and keep it in savings. So if you are prone, year after year, to have your tax refund disappear, maybe try putting your money back into your pockets every single paycheck. See if that's going to be a difference for you.

Speaker 1:

Now here's part two. Okay, you're going to get your refund. I already told you that I think that you should go and switch and, you know, get your money back in your paychecks versus one big lump sum. But you know we're a little past that. So if you are getting a lump sum this year, my recommendation is in this guideline and this is a guideline. It is a guideline. It is not the end all be all. Your numbers can look different, but if you need somewhere to jump off of, right here it is Okay. Right here it is Okay.

Speaker 1:

First thing is 50% of your refund to be your savings, your emergency fund. If you have no emergency fund or no substantial savings, we are putting money in there. And then you're going to contact me at the Better Budgeting Playbook and you are going to talk to me about how are we going to keep it there, because something shiny will come along and we will probably spend it and I don't want you all to do that. I want this to be long-term, sustainable change. Okay, 50%. So $10,000 refund. $5,000 is going straight to savings, all right. Your next one would be debt 30%. I want you to put 30% on debt. If you are so close to paying something off and that takes 35%, all right, cool, we're going to bump this up to 35%. We're going to pay off that debt. Here's the other thing about paying off debt is being really strategic with it. A lot of the times, you're going to hear the snowball method, you're going to hear the avalanche method.

Speaker 1:

Both of these I cover in previous episodes here at the Better Budgeting Podcast, but I really want you to see what is going to change my everyday life and can I get that paid off. Here's where I'm jumping in as being healthy again, all right. So the last part is the 20. What do we do with this 20? This is where we go have some fun, y'all. This is where we really enjoy life. Okay, you were going to use this for fun, probably throughout the year anyway, if you would have not gotten the refund. So I want you to go and have a little bit of fun with 20%.

Speaker 1:

One of the big things that I take pride of in the Better Budgeting Playbook and me as a coach is that I am not a rice and beans type of coach. I want to know what is really really important to you. I even talk to my clients about this and we call it the totem pole of financial freedom. If you have all of your things taken care of, you've got your 50% savings, you put the 30% debt and then you got your 20% left. I want to know what are you going to use that on? What is really really important to you? And I call it a totem pole because at the very top of the totem pole is the really really important things. At the bottom it's important because it's on the totem pole, but there's things that are a little bit more important and that's why it's near the bottom.

Speaker 1:

So first, when you get this 20%, I want you to write a priority list. I want to know if you had $200, $2,000, whatever that 20% is. What is the first thing that you want to do for fun, whether it be I'm going to take all of this and I'm going to save it for vacation, or I'm going to take half of that 20% and I'm going to buy a new TV, or I'm going to, you know, take my daughter or son or my husband or my wife out to eat or a ball game, whatever it is, or my husband or my wife out to eat or a ball game, whatever it is. You know, I like baseball. I had to throw it in there.

Speaker 1:

But I want you to not just have the 20% and be like, oh, it's free money to spend on whatever I want. I want you to step back, write a priority list of if I had extra money, what would I do with it? Would I go shop around Target? Would I go and invest in something so I could earn more money? What would you do?

Speaker 1:

And I think that's the big thing that gets missed when you are just rice and beans and beans and rice and not seeing a restaurant and all this other stuff, you forget about the things that you value, whether it be family time, connection with a spouse or another family member or friends, or you just love to take a weekend trip and go hiking sometimes and does cost a little bit extra money on the fuel and the gas and where to stay and things like that. I think it's really really important, as you're going through your financial freedom journey, evaluate what's really really important to you, get the debt paid off, get the savings in place and to a point where you have some cash flow, and then let's integrate some of those really important parts of life, that value connection, that value purpose, because those are not to be put to the wayside during your financial journey. I hope that you enjoyed this episode. I really appreciate you being here and sticking it out with me and I will talk to you soon. Take care.