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    How to Budget Your Tax Return
    How to Budget Your Tax Return

    Disclaimer: Penny Calling Penny is an affiliate website. This means that we get a small commission when you click some of the links in this article. Don’t worry – we’ll never recommend anything we wouldn’t use ourselves.

    Filing a tax return is no fun at all, but getting the money from your tax return? Now that’s the good stuff. 

    The question is, what do you do with that chunk of change? Are you part of the majority who plan to save their tax return or the minority of people who expect to spend it on a “splurge” purchase?

    Or are you planning to do neither – or even both! – because you aren’t sure how to budget your tax return? 

    If that’s the case, have no fear. This is the start of Penny Calling Penny’s “Making the Most of Your Money” series, where we dive into the best ways to budget unexpected money coming your way. Today, we’re diving into the best way to budget your tax return.

    How to Budget Your Tax Return (even if you’re new to budgeting)

    Being new to budgeting can make it overwhelming, especially when dealing with how to budget your tax return. More money can make the stakes feel high, and you really want to make your budget work. The good news is, that you’re probably already budgeting without even realizing it. 

    Everyone has a few monthly expenses that they know the exact amounts and due dates for. Car payments, loan repayments, rent, or a mortgage, for example. When making a budget, these are called your fixed expenses.

    Then, you have things that you know you’ll need money for every month, but the amount varies a bit. Things like filling your car with gas, paying your electric bill, or buying groceries are all on your radar, but you don’t have an exact number. These are called your variable expenses.

    Finally, you have what budgeting calls periodic expenses. These are things that happen once in a while, but not every month. For example, paying property tax, yearly subscriptions, and car maintenance. These expenses are the kinds of things you might forget until they’re right on top of you.

    When you’re trying to figure out how to budget your tax return, you’re probably trying to figure out which category your tax return should settle down in. The answer is that, like any income, your tax return belongs in all the categories. 

    Why bother with a budget?

    Learning to budget is learning a new skill and can feel like too much trouble. After all, you just filed a tax return, and learning how to budget your tax return sounds like even more work. So why bother? 

    Budgeting can make a striking difference in the way you handle your money. When you start a budget, you probably don’t know exactly how much you spend on most things in your variable expense category. That can be a real problem. 

    When you examine how you’re spending your money, you might be surprised at just where it’s all going. If you’re anything like me, you’re probably lamenting how expensive everything must be getting… until you look at your spending and realize that you have more control over your money than you thought.

    Budgeting helps you get back in the driver’s seat. Learning how to budget your tax return might end up being the best thing you ever did for your bank account!

    So where does that refund money belong in my budget?

    Earlier, we said that your tax return should go in all your budgeting categories, but what does that look like in real life, and how does saving money fit into those categories?

    Saving money without a goal in mind guarantees that it won’t stay in that savings account long. To keep your savings saved, that money needs a job. This is where the categories come in. 

    Are you saving to have an emergency fund for your fixed expenses?

    Are you saving for a new car, a vacation, or another periodic expense?

    Are you saving to give yourself money for extra shopping, a hobby you enjoy, a date night, or some other variable expenses?

    When you’re planning out how to budget your tax return, remember that it all comes down to these three simple categories. Where exactly your return goes, and in what amounts, is completely in your hands. 

    Do you have a loan that you’re trying to repay ASAP? A savings goal you’ve almost reached? Maybe you’ve been especially responsible with your money lately and want to give yourself a reward. 

    Figuring out how to budget your tax return will depend on your unique goals and struggles. This is one of the most important budgeting questions to ask. 

    Before you start budgeting, sit down and write your top three financial goals and struggles. These can show you what changes you need to make and where you can put the extra money for your tax return.

    Your top three goals list might look something like this: 

    1. Have a fully-funded emergency savings account
    2. Pay off debt (credit card, student loan, etc.)
    3. Save for a new car

    While your struggles list might include:

    1. Prefer to eat out instead of cooking
    2. Being behind on payments for a loan and getting late fees
    3. Impulse spending or “retail therapy”

    Outlining these can help you learn where you want to focus extra money. More importantly, your struggles list can help you make a plan to avoid breaking your budget. 

    Now we’ve covered some budgeting basics, but this is about how to budget your tax return, so let’s talk taxes.

    Tax Return Refund Dates

    If you haven’t started filing for your tax return yet, there’s no time like the present! Step away from learning how to budget your tax return and focus on filing. Filing a tax return online has never been easier. Need help filing a tax return

    You can do the research on your own or check out our partners at TaxSlayer. Their free edition gives you access to tax experts who can answer any questions you have, while paid editions can make the wait for that help even shorter. 

    Go ahead and bookmark this article to get your filing finished, and then come back when you’re done. (Don’t worry, we’ll still be here.)

    All done? Way to go! When you’ve finished filing your tax return, you might be impatiently wondering what’s taking so long. After all, you can only learn how to budget your tax return now. The actual budgeting can’t be done until you have the money in your account.

    As a general rule of thumb, you can expect your tax return within three weeks of filing. To get a more exact estimate, you can use the IRS’s Where’s My Refund? tool. 

    This tool helps you track exactly when you can expect your refund. If any problems pop up, you can go here for instructions on how to solve them, so your refund hits your pockets as soon as possible.

    Budgeting Online

    Alright, now you should either have your tax return in hand or know just when it will be. The next step in deciding how to budget your tax return is deciding how you’d like to budget. 

    More and more people are budgeting online, using websites or apps, and it’s easy to see why. Budgeting online is incredibly convenient. Your budget is as small and sleek as your phone, and you can budget from anywhere. The moment your tax return (or paycheck) hits your account, you can put it into your budget.

    Budgeting from anywhere with ease also makes it very easy to make changes. Did you spend more on groceries than you expected? Do you need to cover an unexpected car repair? Budgeting online means you can deal with the changes right away. 

    The next budgeting questions to ask are, “Which budgeting app should I use? And is budgeting online right for me?” 

    The number of budgeting apps out there can be overwhelming. A Google search for “budgeting app” turns up about 48 million results. With all these choices, you might feel a little paralyzed. Here are a few options to get you “unstuck” and back to getting the hang of how to budget your tax return.

    1. Qapital

    Looking to hit not two but three birds with one stone? Try Qapital, the all-in-one budgeting, banking, and investing app. Their Payday Divvy feature takes budgeting off your plate altogether by allowing you to create a “set it and forget it” budget. 

    You can get started with Qapital’s PayDay Divvy feature, diverse investing, and habit-forming rules feature with their most popular plan. “Complete” is their mid-tier plan, costing just $6 a month. 

    Their 5-star rating, low price point, and seamless user experience make checking out Qapital a must when working on how to budget your tax return.

    2. Mvelopes

    Intimidated at the thought of budgeting alone? Mvelopes is a life-saver for people who want their budget to be working as hard as possible right away. 

    On top of the usual budgeting set-up, Mvelopes gives you access to live help and their knowledge base with all of their plans. And they don’t stop there. Their $9.97 mid-tier plan, “Premier,” gives you access to their video learning library, which can help you build your budget more effectively.

    Want to inject your budgeting with rocket fuel? Try their “Plus” plan. For just $19.97 a month, you’ll get a dedicated personal coach. They’ll help you make a personalized financial plan and meet with you quarterly to review it. 

    All the help of a financial literacy expert for less than a dollar a day and thousands of positive reviews? You know Mvelopes had to make it on our list. When it comes to figuring out how to budget your tax return best, extra help is always a big plus.

    3. YNAB

    Getting used to budgeting and learning how to budget your tax return can be a monumental task. Fortunately, YNAB is here to help. The acronym stands for “You Need A Budget,” but don’t let the simple name fool you. 

    YNAB has one of the largest financial help libraries out there. They have help with everything money, from learning how to budget to handling finances with a partner. 

    Their library isn’t just static, either. You can find their supportive community of over 200,000 people on Facebook. You can ask questions, share successes, and get advice. On top of that, their weekly email newsletter gives you tips and tricks on making the app fit your finances like a glove. 

    YNAB doesn’t have tiered plans. You’ll pay one flat rate of $14.99 a month, and they offer a discount when you buy an annual subscription. The supportive community, free library, and excellent design all tie up into one must-have app for getting the hang of how to budget your tax return and your regular income.

    4. Mint

    Looking for a free budgeting app? Look no further than Mint. This free budgeting app comes from finance giant Intuit, the same company that owns TurboTax and Credit Karma. And it’s absolutely loaded with free features.

    You can track spending and saving, monitor your credit score, and track your bills, all in one place. You never have to pay to use Mint, but you can add individually priced services like bill negotiation and financial planning. 

    When you’re learning how to budget your tax return and want to save every penny, check out Mint.

    What’s the catch to budgeting online?

    The short answer: there isn’t one! The longer answer? Your personality and budgeting situation are totally unique. What works for one person may not work for another, and getting started with how to budget your tax return is no different. 

    Some people don’t like the idea of paying for a subscription or dealing with ads. Maybe you’re an “out of sight, out of mind” kind of person, and a budgeting app gets lost in a folder. 

    You might struggle with being too quick to make changes when you can budget from anywhere. (Don’t worry, it happens to us all from time to time.) 

    The good news is that you can overcome most of these issues with practice. The more you get used to budgeting, the more natural it’ll feel. 

    Budgeting On Paper

    People who like to have physical reminders will love budgeting on paper. Paper budgets are great to have if you struggle with impulse spending or try to shuffle your money between categories. 

    The rigidity of a paper budget comes from space constraints. You’ll run out of room trying to move things around, crossing and re-writing over and over. You can also keep your cash or card in your physical budget, giving you a visual reminder of how much money you have left to spend. 

    As sturdy as a paper budget is when it’s done, it’s incredibly flexible to set up. You can use the 70/20/10 budgeting method or the 50/20/30 budgeting rule. You can use a zero-based budget or the envelope system.

    When you’re working out how to budget your tax return, remember that the most important part is finding a system that works for you. There are dozens of ways to make a budget, whether you’re budgeting on paper or budgeting online. 

    Your budget can follow one of these methods or none of them. You can even take a little advice from all these methods when forming your budget. It only has to make sense to you! 

    How To Budget Your Tax Return and Give Yourself A Financial Edge

    When it comes to financial freedom, budgeting is a key piece of the puzzle. Learning how to budget your tax return is the perfect way to start yourself on a better financial path. 

    “Extra” money, like a tax return, can give you an edge when it comes to escaping debt and building wealth. When 7 out of 10 people live paycheck-to-paycheck, falling behind is scarily easy. 

    Your tax return can give you some breathing room. You can bulk up your savings, pay off debts, and start investing. In a word, you can start building better financial habits. Better financial habits today will start to snowball. 

    Getting your tax return is always a great feeling, and the snowball effect can make that great feeling even better. When it comes to investing and saving, you can see those good financial habits paying off in real-time, month after month.

    Getting the hang of how to budget your tax return is hard, but we’re here to help. Join our community and find tips, tricks, and support for building those healthy habits. From your tax return to an ordinary payday, every Penny counts!



    "You must gain control over your money or the lack of it will forever control you."

    Dave Ramsey

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