• Terry Herr, CFP®, CLU

7 Ways To Waste A Tax Refund!

Filing income taxes is an annual ritual few of us enjoy, except perhaps if you’re expecting a big refund. But is a big refund really something to celebrate? Who doesn’t enjoy getting a check in the mail, especially a big one?

Several years ago, Ben Stein wrote a book, “How to ruin your financial life.” It’s a humorous approach to everyday highlight the poor financial choices almost everyone does or has done. His approach is to teach through the ridiculous. Following Ben’s lead, let’s explore the top 7 ways you can waste your refund and be financially irresponsible.

1) Buy whatever you want – there’s no need to put your refund into a savings account as an emergency fund. After all you’ll get another refund next year, right?

2) Buy a new boat – Nothing makes a man happier than the day he buys a boat…go ahead, enjoy it. Boats are like a two-for-one deal because the second most happy day of a man’s life (after paying a small fortune to operate it for a few years) is selling it. No matter if he sells it for less than half of what he paid, he’ll focus on all the money he’s saving in operating cost. B.O.A.T stands for ‘Break Out Another Thousand.’

3) Take a vacation – Vacations are great especially when the government paid for it…never mind the fact that tax refund was paid because you gave the government an interest free loan all year.

4) Loan it to family – There’s no better way to blow your tax refund!

5) Buy a round of drinks for your friends – Drinks are fun and why worry about the future financial and health challenges? Maybe you can even host a tax refund party?

6) Spend it on your appearance – you worked hard all year for your money and it probably shows. Your tax refund is a great opportunity to correct your physical flaws that came from the stress of working.

7) Take acting classes – If you can act, you’ll have some backup skills. Why pursue advanced degrees or career improvement? Those sorts of activities just result in more income and more tax! It might also mean you’ll have to work harder which will certainly mean more money spent on your physical appearance.

Those are all great ways to blow your tax refund but let me give 10 ways how you can use your tax refund to improve your financial life.

1) Reduce your tax withholding on your paycheck so that your paycheck is higher.

2) Increase your employer retirement plan contributions.

3) Contribute to an IRA, if you don’t have an employer retirement plan.

4) Start a 529 plan for your kid’s education.

5) Pay off high interest debt.

6) Create a real emergency fund. One you only touch for real emergencies.

7) Prepay your mortgage.

8) Make home improvements that add value to your home.

9) Buy life insurance, disability or long-term care insurance to protect you and your loved ones.

10) Hire a financial planner who can translate your goals into action step you can take today to help ensure your future.

Remember the tax refund is the government returning your money. Money you unnecessarily paid to them. With the new tax law is it highly probably your overall tax liability will be reduced. As your prepare your 1040s this year be sure to ask your CPA if you should change your withholdings.

We know none of our clients will waste their refunds, but please share your ideas in the comment section below. What ways to you think people waste their tax refund? What ways can we be more financially responsible?

Any opinions expressed in this forum are not the opinion or view of American Portfolios Financial Services, Inc. (APFS) and have not been reviewed by the firm for completeness or accuracy. These opinions are subject to change at any time without notice. Any comments or postings are provided for informational purposes only and do not constitute an offer or a recommendation to buy or sell securities or other financial instruments. Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors. Herr Capital Management does not provide tax advice and this content should not be regarded as individual tax advice.


Herr Capital Management, LLC   27 West Plainfield Road, Countryside, Illinois 60525  

Where Prosperity Begins©  Phone: 312-697-1600  Fax: 312-697-1601

Form ADV - Privacy Statement

Customer Relationship Summary (Form CRS)


Securities offered through American Portfolios Financial Services, Inc. Member FINRA/SIPC.  Investment advisory services offered through Herr Capital Management, LLC, a registered investment advisor independent of American Portfolios Financial Services, Inc.