How to Use Your Tax Refund (And Why You Shouldn't Want One) - 29

Action Item: Look at your most recent tax refund and divide that number by 12. That is how much extra money per month could be in your paycheck with the right withholding. Write that number down and ask yourself what you would do differently every single month if that money was already yours.

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Summary

In this episode, I break down why a big tax refund is not the win most people think it is, and what you can actually do about it. I walk through the real opportunity cost of overpaying the IRS every paycheck, from missing out on high yield savings rates to leaving debt interest piling up while your money sits with the government earning nothing. I cover how to put your refund to work right now whether that means building your emergency fund, paying down debt using the snowball or avalanche method, or finally getting some money into a retirement account. Then I introduce Ryan, a 27 year old who thought his giant refund was helping him save, until he realized the IRS had been holding $480 of his own money every single month. The key takeaway: adjusting your withholding does not change your income, it just changes who has access to it.

Resources & Links Mentioned

Why is receiving a large tax refund a bad thing? https://www.taxgpt.com/answer/why-is-receiving-a-large-tax-refund-a-bad-thing

IRS Tax Withholding tool https://www.irs.gov/individuals/employees/tax-withholding

What to do with your tax refund (Fidelity) https://www.fidelity.com/learning-center/smart-money/what-to-do-with-your-tax-refund

Should I Use My Tax Refund to Pay Off Debt? https://www.mindfullymoney.com/blog/tax-refund-pay-off-debt

6 Smart Ways to Invest Your Tax Refund in 2026 https://smartasset.com/financial-advisor/invest-your-tax-refund

Your tax refund could be $1,000 larger in 2026 (CNBC) https://www.cnbc.com/select/average-tax-refund-2025/

We Were NEVER Taught About Taxes (Let’s Fix That) - 9: https://youtu.be/hLrqeDfxTV4

How to Harvest Gains & Losses on Fidelity: https://youtu.be/Qh49ePRj9mc

Free Healthcare with an HSA - 6: https://youtu.be/dnOr-lkNxo8

FPYA Financial Planning Guide: fp4ya.com/guide

Timestamps

[01:39] Why a large refund is not a good thing and the real opportunity cost

[04:56] What to actually do with your refund: emergency fund, debt, investing, and more

[09:08] Using your refund to boost your retirement savings

[12:10] Tax changes in 2026 and what they mean for your withholding

[13:10] The fear of owing money and how the IRS withholding estimator solves it

[15:21] Ryan's case study: how $480 a month changed everything

[20:23] Quick win: divide your refund by 12 and see what it means for your monthly cash flow

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