Issue #277: How NOT to spend your tax refund

March 19, 2025 • Issue #277

Hi y’all —

By the time you read this, I'll be on vacation! I'm trading Brooklyn for Spain, where my plans are to see a lot of art, eat a lot of tapas and drink a lot of wine. In the words of Lorde, can you reach me? No, you can't.

Stateside, though, we're about a month away from Tax Day, which means it's the perfect time for me to resurface Issue #33 from the Dollar Scholarchives. (I've updated a few of the facts and figures for 2025.)

Much of my life is spent knowing what I should do and promptly deciding to do the opposite.

I know that I should go to bed early instead of watching White Lotus on Sundays, but I don’t. I know that I should think ahead to put in a load of laundry before the exact moment I realize I’m out of clean pants, but I don’t. I know that I should take my heartburn pill before wine-and-cheese night to avoid tossing back 20 TUMS later, but I don’t.

For tax season, though, I’m going to attempt to outsmart myself. By identifying the wrong things to do, maybe I’ll accidentally end up doing the right ones. So, what shouldn’t I use my tax refund for?

I called Sean Weissbart, tax guru and partner at Blank Rome LLP, to get a list of off-limits stuff.

Weissbart started out by reminding me that although it may feel great to get a huge check back from the government, it’s not actually good for my wallet. A large refund means I’ve withheld too much from my paychecks. This amounts to “giving the IRS an interest-free loan,” as he puts it.

Unfortunately, a lot of people rely on their refunds for a financial boost. So far this year, the average refund is $3,382 — a not-insignificant chunk of change. But even if my refund is only a couple bucks, I still need to be smart about how I use it.

“When you get a refund, my advice is to use the money to make more money or to achieve long-term goals rather than use it for frivolous or unneeded items,” Weissbart adds.

Tax refund: $10,657 Me at Wingstop: bring me all the wings till i say stop

Other people are all over the map on this. Half of respondents to a National Retail Federation survey said they planned to put their refunds in savings, while 33% said they planned to pay down debt and 28% aimed to take care of everyday expenses. Only 10% said they were going to splurge.

Self-discipline is key for me, too. Principal's Heather Winston said it’s natural to want to spend quote-unquote free money on something fun. And I can… as long as I commit to blowing no more than 10% of my refund.

“Don’t use the whole balance for a great night out with your friends, a trip you couldn’t otherwise afford to take, or gambling in hopes of doubling the amount,” she says. “The reality is that you can still have fun with your tax return, but aim to balance the fun with some more responsible spending.”

As for the other 90%? If I’m deliberate about it, Weissbart said I might even be able to use my refund to save me more money. For example, if I use my refund to contribute to a 529 educational plan for myself or others, I could score a state tax deduction. Same deal if I tap it to pay off my student loan interest.

Weissbart said I probably should not put my refund directly into Cash App or an Amazon gift card, even though it’s tempting. Having a balance languishing in my account won’t do me any good, because I’ll inevitably fritter it away on things I don’t technically need.

Another mistake would be to dump the refund into a low-interest-bearing checking account. That’s just wasteful.

“As tempting as it can be to have a little bit of ‘mad money’ sitting around, think long-term,” Weissbart says. “That $100 could be $110 next year … growth can be tremendous if you’re smart about it.”

The bottom line

(but please don't tell me you scrolled past all of my hard work)

First of all, I should review my withholdings if I’m getting a giant refund. Second, I should try hard not to spend it all at once on something frivolous. Investing it, paying off debt with it and putting it into a high-yield savings account are good options.

If the refund is burning a hole in my pocket and I feel I absolutely must buy something silly with it or I’ll explode from being too financially responsible, I should limit myself to only spending a small portion. Ten percent should be more than enough.

“Feel free to splurge on a fabulous meal or a snazzy pair of pumps, but you don’t have to use the whole refund amount to feel like you’ve treated yourself,” Winston adds.

via Giphy

Smart MONEY MOVE

use your home as a piggy bank 🐖 💵

Piggy BankDid you know there are a ton of ways to get money from your home equity? Home equity loans, HELOCs and cash-out refinances can all help you tap that wealth. You can use the funds for anything, including renovation projects that could make your home more valuable in the long run. And because these options are secured by your house, they typically come with lower rates than other lending products. Wondering which route is right for you?

See Money’s list of the best home equity and cash-out refinance lenders providers!

Receipt of the week

check out this wild celebrity purchase

via Instagram

England's King Charles just spent £3 million — the equivalent of $3.8 million — to buy the house next to the property owned by his wife, Queen Camilla. The fact that the "Old Mill" next to her Raymill was up for sale apparently caused her "great anxiety," especially because there was a proposal to turn it into a wedding venue, according to the Daily Mail.

Internet gold

five things I'm loving online right now

1

You can now try CatGPT, which is just like ChatGPT except all it does is meow. (There's also a helpful version of CatGPT from the Cornell Feline Health Center that provides cat care tips.)

2

Amid *gestures* everything else, the Loch Ness Monster is back. "We've had numerous observations over the years, but this recent sighting has been particularly captivating," Nagina Ishaq, general manager of the Loch Ness Centre, said in a statement. "This potential sighting is a reminder that the mystery of Loch Ness is far from solved."

3

Egg prices have dropped… but not for long.

4

What's happening with NBA nicknames? GQ investigates (and has a few suggestions).

5

Goat in geode.

401(k)ITTY CONTRIBUTION

send me cute pictures of your pets, please

via Mary Ann Quinn-Allen

This is Cocoa. Cocoa just heard how you're planning to spend your tax refund and found it appawling.

I'm taking a short break for my vacation. See you soon!

P.S. How do you intend to put your tax refund to use this year? What's your favorite eggless recipe? If you played in the NBA, what would your nickname be?

This newsletter is free because Money earns a commission when you click or make purchases from the links in this email and on our site. We also receive compensation for some of the products and services featured in this message. Offers may be subject to change without notice. about how we make money.

• •

To stop receiving these emails, unsubscribe or manage your email preferences.

Copyright ©2025 Money Group, LLC. All rights reserved.

Metro Office Park Calle 1, Building 7 Suite 204, Guaynabo, Puerto Rico 00968, USA

Issue #277: How NOT to spend your tax refund

Older messages

The hot travel tip you need

More Americans Are Taking Hardship Withdrawals

Issue #276: When to have The Talk

When your household appliances break down…

How much interest are you earning on savings?

You Might Also Like

Harry's Take 3-19-25 The Truth: Consumers Much More Bearish Than the Stock Market “On Crack”

👋 See ya, US stocks

The hot travel tip you need

More Americans Are Taking Hardship Withdrawals

Sleeping is Easy; Trading Should Be As Well

New Customers' Habit - Issue #517

Fast-er Food: A productivity surge at U.S. restaurants

Issue #276: When to have The Talk

Is Manus The New DeepSeek? - Issue #516