What to Do with Your Tax Refund

Today we are joined by Casey Messer, who is Centric's Training Manager, to chat about different ways to put your tax refund to good use.

Transcript

Speaker 1: 0:01

Welcome back to another episode of the Live Better Podcast by Centric Federal Credit Union. I'm your host and centric social media and marketing specialist, Emma Baes. I'm so excited you're here today. Every month we post a new episode where I'm joined by guest to chat about all things living better and finances subscribe today. So you never miss an episode. Today we are joined by Casey Messer, who is Centrix training manager to chat about different ways to put your tax refund to good use. So for some of our listeners who may not know who you are, just tell us who you are and, and a little bit about what you do here at centri.

Speaker 2: 0:40

Well, like you said, I'm the training manager and just a little bit about my journey. I started as a teller here, like right out of college, and I did, um, I worked in the solutions department and so I did collections and then I worked as a community partner coordinator. So I made sure that our, um, partners in the community like knew about our financial education and what we had to offer, and just made sure that they were up to date on all the things, um, all things centric. Mm-hmm.<affirmative>. And then now I am the training manager. And so I think just my love of like teaching and and coaching led me to the training position. So

Speaker 1: 1:11

Yes. Uh, and you are very good at it. Thank you. I must say, um, so tis this season for taxes. Some people love it, some people hate it,<laugh>. Um, but I do know a lot of the members that we serve get a tax refund. And so I kind of just wanted to go into a little background on that, like why some people get such significant tax refunds and some end up owing money. Um, so what I found is if you're gonna get a tax refund, it could be for a couple reasons. One, it could be because, well really it's your money anyway, but you have overpaid throughout the year. So like if you have your employer withholding too much from your paycheck, that would be one reason you might would get a tax refund. And then another is even if you have very little income, if you have a lot of deductions or qualify for tax credits, then you know, that would offset what you owe and, and you might would get a refund back. Um, so let's say that I'm a member and I'm living paycheck to paycheck. Um, you being a certified financial counselor, what advice do you have for what I could potentially do with that tax refund?

Speaker 2: 2:23

So the first thing, and like foremost, like the most important thing is to establish an emergency fund. And I don't mean like three months of your salary, I mean just the basic, and that's a thousand dollars. So if you don't already have that set up or you're working towards it, go ahead and like fund that and just at least establish it, get it going. Um, this is gonna protect you from anything throughout the year that comes through that you're not really expecting, but it's gonna keep you from putting all that on a credit card and, and it's gonna take you a while to pay that back. So it just helps you have a little bit of money to the side that's gonna grow for you. Mm-hmm.<affirmative>. So if you don't use it, that's a plus side, right? Right. Like it's gonna grow and add interest. So you'll just have more, um, after that, so

Speaker 1: 3:00

Mm-hmm.<affirmative>. And let me just add to that, um, how important that is. So when I, when we first, when I first got married, we had very little, definitely didn't have an emergency fund yet, and one of our appliances had to be replaced and we had to put that on a credit card and we had to take out a retail credit card, like we didn't have one before. We had to get that and then put the appliance on that credit card. And you know, it's like kind of like hindsight's 2020. Had I known then what I know now, you know, that credit card hurt our credit so bad because we just didn't have the knowledge like how to handle that properly and about making payments and interest. Like that was just so beyond us at the, we were so young. And an emergency fund is so important for that reason, you know, not only to keep you out of debt, but just to keep you on top of things. And, um, yeah, that, that was one of the things I really regret. It was awful, but, and you know, maybe you're lucky and an emergency doesn't come up and that's great, but there will come a time where you'll be glad that you have it for sure.

Speaker 2: 4:08

Yeah. Well, and just going into like paying down debt, like what you just said, um, if you do have an emergency fund and you have that set aside and you feel good, you know about that, the next step I would say is just pay down debt. Mm-hmm.<affirmative>. So, you know, putting more money into your pocket. If there's a smaller debt that you could pay down, I think that's the next step. So if you, you know, have a couple of credit cards that you've racked up the balance on, it's good to pay that off. And then that just means that when that next month comes, you don't have to pay that bill, you get to keep that money. Right. Um, and so having that big extra refund or just extra cash at all mm-hmm.<affirmative> can go towards that. And then, you know, we like to say the snowball method, so take the smallest and then you go up towards the largest. Um, that just like helps with motivation. It helps you be motivated to see it coming down and see your balances decreasing. Mm-hmm.<affirmative>.

Speaker 1: 4:53

Yeah, for sure. I think that's a great idea. Um, so we talked about emergency funds, we talked about paying off debt and about paying off debt. Um, I know, you know, when you, you see a tax refund hit your account, it can be super exciting and you're like, oh yes, I wanna do this and I wanna treat myself because, you know, the year has been hard and, and I completely get that and it requires serious self-discipline to be able to tell yourself no and be like, you know what, no, I cannot splurge crazy right now. Like this has to go here and this is what I need, this is what my family needs. This is what's best. It definitely takes some self-discipline

Speaker 2: 5:35

<laugh>. Yeah, it does. And there's, there's tons of things that we could like do for our future self, right? Mm-hmm.<affirmative>, if we would just do like, be disciplined and just take the time, we could like prepare ourself for the future. So things like, you know, your kids, like are your kids gonna go to college? Or even just tuition costs in general, you know, if you have that, put money aside for that. Like do things that are gonna help your future self because doing what feels good right now is only gonna feel good for a little while. Right. Right. Yeah. And then, you know, you're gonna wake up two weeks from now and wonder where all your money went. Exactly. So I would definitely say, you know, your future self would really thank you if you had put up for things like retirement, you know mm-hmm.<affirmative>, if you don't already have a retirement savings or even if you do, you know Right. Put more money into it. Yeah. That's always gonna help you. Um, but things that are coming up in the next couple of months too, so back to school, if your kids are gonna be starting sports, I mean, there's things that you can prepare for that are coming that are a little bit near than retirement or college. Right. You know, even Christmas, if you don't say for Christmas every year and you know that that's something that you struggle with and you end up putting Christmas on a credit card, put some money aside for Christmas so that you don't have to worry about that and then you're not paying Christmas the next year. Exactly.

Speaker 1: 6:44

Yes.

Speaker 2: 6:45

It's, it's another discipline thing, but you know, it, it's just good to, to prepare and to think about what's to come so that you don't find yourself struggling again. And, and you just felt so good about having all that extra cash.

Speaker 1: 6:56

Yeah. And two, I mean one of the thoughts I had was even if, you know you have an emergency savings and you don't have a ton of debt and you're okay financially, but you're gonna get a little bit of a refund, um, you know, you cannot go wrong in saving it, even if you're not saving for anything specific right now, cuz you've got stuff covered you, you will need it at some point and you can never go wrong with just saving it. Yeah.

Speaker 2: 7:21

So yeah. Saving it.

Speaker 1: 7:24

Yeah. Um, so another thing I was thinking about was like investing. So, um, if you can invest not maybe not all, but some into some kind of an asset that does not depreciate. So, you know, kind of again, set yourself up, set your future self up, you know, instead of blowing it on things that will depreciate like, you know, a shopping spree or, or you know, something like that. So, um, we've talked about several good ways to utilize your tax refund if you're gonna get one. So what are some things you advise against?

Speaker 2: 7:58

So there are a couple of things, but the first thing that comes into mind is a lot of times you're offered like a different way to receive your refund mm-hmm.<affirmative> than just going into your account. And I would 100% say that you should have your refund, go into your checking account, don't use a prepaid card, you know, or don't, um, use some other forb of that method. Anything else, really even a check. Like you're gonna have to wait on that. And so I would just say direct deposit into your account. You can see it on your mobile app, you can have access to it like immediately and there's no wait times on that. Right. With those prepaid cards. Sometimes they like charge you a fee to to check the balance to use it. Um, if you don't use it the way they want, you know, and you might not have access to all of your money as quickly as you want. There may be limits in place mm-hmm.<affirmative>. So I would just say no to those prepaid cards and yes. A direct deposit. I think that's like my biggest thing is it's so important. Yeah. Just like, takes time to get your money, so Yeah.

Speaker 1: 8:53

And why Yeah. Like what's the point? Yeah. Um, so as far as ways you'd advise against spending it, what do you think about that?

Speaker 2: 9:01

So definitely not the huge shopping spree. Mm-hmm.<affirmative>, like we just talked about what feels good right now is not gonna feel as good in two weeks or even like the next day sometimes. Right. You wake up and you're like, why did I just do that? You know? I went into Target for one thing,<laugh> and it just happens. Um, but just, you know, unnecessary spending I guess is kind of how I would say that, you know, it's okay to, to spend a little bit on yourself, you know, but unnecessary spending take care of your, your needs first and then your wants will come. Right. You know, you can do that after. But like you said, saving in, that's, that's the most important thing. And then, um, then your, your wants can come after that. Right. And, and just, you know, unnecessary upgrades. Like, do you really need a new TV at this time or is your TV just signed and it feels good and you know, again, that's a want, that's not a

Speaker 1: 9:47

Need. Right. Or do you really need the brand new iPhone? Yeah. And you have a decent, you know, just little things like that. But I do think, you know, like a little treat for yourself. Understandable. You know, as long as there's some discipline with that and you're not blowing the whole entire thing. Yeah. Um, for sure. Um, so what about, um, keeping a lot of cash at your house? So, you know, if if this hits your account and then you run to the bank and withdraw all of it, what do you think about that?

Speaker 2: 10:19

So I think sometimes, um, and I, I kind of laugh at this question because I think that we are like this sometimes my husband and I, my husband more so than I am, he feels like if he can hold onto it physically, that he's gonna hold onto it longer<laugh>. And so he wants to go get it and bring it home and like sort in the safe or whatever. But what you're missing out on is interests. Like the bank will pay to keep it here. And so that's what's really cool is that you can actually make your money grow for you. Exactly. Um, versus taking it home and, you know, there's so many risks with that. We don't have to get into that, but like yes, for sure. There's tons of ways that you can lose your money at home. Mm-hmm.<affirmative>. So bring it here, bring it to the bank and just let it grow for you. There's CD options, checking accounts are paying you here at Centrix, so why not mm-hmm.<affirmative> and we have a savings account that pays too. So savings, checking and then the certificate too. If you don't need that particular money right now, set it up in a certificate and let it grow for you. Those rates are great right now.

Speaker 1: 11:10

Exactly. I, I<laugh> completely think it is the best idea to keep it in a place like centric where it can grow, where it's insured, where it is safe than just storing cash away at your house. Yes. I think that can absolutely be a terrible idea. Um, so any other ways that you think you should not spend your tax refund money?

Speaker 2: 11:35

Well, just kind of like what we were talking about, um, with unnecessary spending, I would also, this just comes to mind, it's unnecessary for you to lend your money to others. So I know that when we are super close with maybe our family or our friends and we've seen them struggling or we see them come into some struggles mm-hmm.<affirmative> or even not even a struggle, but just trying to like get, get going in life and we want to be the one to save the day. Make sure that you're prepared for that. And, and when I say that, I really highly recommend against that because you never know what's happening. They're needing you for a reason, so they needing you because they couldn't manage their finances prior. Mm-hmm.<affirmative> have to take that into consideration, even though you love them and you know them, are they really gonna pay you back? Right. And sometimes they feel like because your family, maybe they don't have to pay you back and Right. Then that's putting you in a situation. So really think about that. I've seen that a lot, um, in our solutions department. I, I saw that so many times. Um, parents or even um, like brothers and sisters, they would sat on a lawn and um, or even just brands, that's, that's something that you really have to make sure, you know, you're, you know, the person that you're getting into business with them essentially. And so just be careful of that, you know, lending it to your uncle because he wants something and he needs something right now and you feel like that's a good idea. I mean, you're giving all your money to them, so just be really careful about

Speaker 1: 12:51

It. And you have to always, I think the safest thing is to assume if you're gonna lend it to somebody and there's a good chance that you're not gonna get it back. And that's something you have to be prepared for once you Yeah. Once you give it away. I mean, I mean that's just the way it ends up going a lot of times, like you said, cuz you've seen that. Yeah. Um, as far as, you know, going back to to good things to do with your tax refund, um, there's always something to budget for. So I don't care how many expenses you have or don't have, there's always regular places that your money needs to go and sometimes those fluctuates. So the first thing that just popped to my mind was groceries. Mm-hmm.<affirmative>, like some, some weeks we can get away with not spending that much on groceries and then other weeks we need extra things and our grocery bill is a lot higher than what we're used to. I mean, there's always somewhere that you can stick that money that will benefit you and your family in the weeks and months to come. Um, as opposed to, like we said, just blowing it. Like, you know, it's easy to say, well I'm not gonna spend a lot, I'm just gonna spend a little bit here. And then once that snowball gets going mm-hmm.<affirmative>, you look up a month later and your tax refund is gone. Gone and you knew anything productive with it. Um, but yeah. And then, you know, can you tell our listeners a little bit about the different counts that we have here at Centri that you could, you know, put parts of your refund into?

Speaker 2: 14:12

So, and I know these all too well just because personally I use them mm-hmm.<affirmative> and so I, so we have, we'll just start with the centric products and then I'll share a little bit about me personally, how I organize what you're talking about. Okay. For extra groceries and things like that. So I do or Centric does have, um, multiple savings accounts for one. So you can have like just a couple of different basic savings and you can name them different things. But then also, um, of course we have the rewards checking account and so you wanna take that into consideration and understand, you know, what money can I place here and how can it grow for me? Mm-hmm.<affirmative>. Um, and then we also have a savings account that earns a high interest rate. So those two are like dynamite together, you know, you can really make your money work for you. You then on top of that, you know, um, there are certain savings accounts that are for certain things. So Christmas Saver and Vacation Saver. So I use a lot of what I just mentioned, but one of my favorite things is having those multiple savings accounts. Right. And saving for all that separately. Mm-hmm.<affirmative>, even if I only have like$10 in there and I put in$5 at a time, I can see that for this vacation or for this circumstance that money is growing. And that's encouraging to me. Um, and I know we've talked about this before and I've shared this so many times. Anytime I get a chance to talk to somebody, having a big savings account is great, but if you don't have even the things inside of it labeled, it can seem like you have money to go on a vacation. When really you break that down and you just have a little bit of extra grocery money, a little bit of this mm-hmm.<affirmative> a little bit of that. And if you just take all that and go on a big vacation, well you've just kinda not set yourself up for success. Right. Set yourself up for failure essentially. So I like to see those things separated and centric. Does a great job of allowing us to have many different accounts and we can label them, we can customize them and then we can see that in our app and we can manage it.

Speaker 1: 15:59

Mm-hmm.<affirmative> that's good. Yeah. Yeah. So you can always go into the app, see what's in which account and monitor that and, and you know, spend accordingly. Yeah. Cuz I know what you're saying, like if you just have a lump in your savings account, like if you did just take your whole tax refund and put it in your savings account. Yeah. That can be okay. Not a bad thing, but like you said, if the only place you're kind of keeping track of what money needs to go where is in your head, it can get kind of fuzzy and it can get complicated and it can be spent on things where it wasn't supposed to be spent. Yeah. So I think the separation thing is wonderful. I really like that. Um, is there anything else you wanted to add about what to do or what not to do with tax refunds before we kind of wrap up?

Speaker 2: 16:46

No, I really think we've covered a lot of the big things. I mean, I know I've said this, but just to kind of reiterate, really think about what's to come, whether it's short term or long term, I think that's the most important thing. And just look and see are there ways that, you know, I can, you know, help myself not feel so stressed. And for a lot of people, and this is something that we, um, share with our staff too here at Centri this time of year, maybe the only time that you receive a big bonus or a lump sum of money at all. And it's really like we go back to the discipline thing. It's really hard to be disciplined and to understand that we really should look at what's to come and not just right now. So that's, if you, if you heard nothing else, hear that, just identify what's coming up and what are your needs. Right. That you can meet with this tax refund.

Speaker 1: 17:32

Exactly. Because the reality is everyday life is not always easy and anything that you can do to make everyday life a little easier, you will thank yourself for later. That's right. For sure.

Speaker 2: 17:44

Yeah.

Speaker 1: 17:45

Well thank you so much Casey for being here today. Um, I hope all of our listeners were able to learn smart moves to make with your tax refund this year. Thank you for listening to our podcast and tune back in next month for another episode of the Live Better Podcast by centric Federal Credit Union. Don't forget to subscribe on your favorite podcast platform to ensure you never miss out on helpful tips like us on Facebook at Centric Federal Credit Union and find us at My centric on YouTube, Instagram, and Pinterest. You can find information about today's topic and more@mycentric.org centric is federally insured by the N C U A.