How to Spend Your Tax Refund Wisely

Are you receiving a tax return? Be sure you are spending it wisely to move you towards your financial goals.

Our taxes are DONE!!! We were expecting about $2000 back on our taxes before actually running any numbers. Well, come to find out we are getting back over $4000.

Seems quite crazy to me that our taxes were that different from last year! But live and learn and do not worry we adjusted our tax withholding back in November and we readjusted them again this week, so hopefully in 2015 we will pay a lot closer to the appropriate amount.

How to Spend Your Tax Refund Wisely

There was a discussion on The $1,000,000 Challenge Facebook group page earlier this week about what one should do with his/her tax refund. Whether it should be saved or used to pay down debt or split up with different purposes. A challenger recommended using the 50/40/10 rule (50% to debts, 40% to savings, 10% spend). I thought this was an interesting and fun yet responsible way to spend your tax refund.

Of course what is “best” for you will be different for me, which will be different for the next person.

How We Will Spend Our Tax Refund

It is funny, not once did my husband and I specifically discuss how we would spend the tax refund. However, we both knew 100% of the return was going towards our mortgage.

Have a Plan for Extra Money

We never had the specific discussion about our tax refund because we always have a plan if we happen to come across extra money. Yes, most of the time it is day dreaming about winning the lottery (without even playing LOL). But with every discussion of coming into some extra money our first step has always been to pay off the mortgage.

Do you have a plan for “extra” money? Whether it is a $100 bill you find in your old coat pocket, a $500 bonus, a $1000 tax refund, a $10,000 inheritance, or a $1,000,000 lottery win. You need to have a plan for this extra money. If you have a plan for it before it even gets to your hands, you will not be tempted to blow it unnecessarily.

If We did NOT have a Plan

I did wonder “how would I want to spend $4000 if we did not already have a plan?” I asked the same of my husband. Neither of us could think of anything we “wanted.” Has our financial goals and extreme focus “killed” our fun and enjoyment or has it made us content?

I often think we push ourselves to the extreme to pay-off our mortgage at an unbelievable rate. We no longer spend money on things we once did. There are often months neither of us take “blow money” or we do not spend a single penny of our restaurant or entertainment budgets. I wonder, are we sacrificing a “fun” and “enjoyable” life to meet our financial goals?

However, pondering the question of how we would spend $4000 with my husband was a big eye opener and reassurance we are doing what is “right” for us. When neither of us could think of anything we “wanted” for $4000. We are completely content with the life we lead. We both know we are beyond blessed and we have all our needs met. What a true blessing.

How do you plan on spending your tax refund? Or if you had to pay more taxes, how did it impact your budget?

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Create a Budget that Works for You

Are you tired of working too hard and wondering where all your money disappeared to each month? You are not alone! For many years I struggled with this same dilemma!

In my young adulthood, I attempted sticking to a budget on several occasions, but it never lasted more than a few weeks, at the very most a couple of months. Sound familiar?

Why Budgets Fail

  • Budget is Too Strict
    With this budget, there is no room for error or a dinner that is more than Ramen. Strict budgets only work with “perfect” conditions. Guess what? Life is not perfect. Unexpected things happen.
  • Budget is the Same Every Month
    You have the same income every month. Many of your expenses are the same. However, if you don’t plan on spending more on electricity in the winter (summer in the south) you are setting your budget up for failure? Christmas? Birthdays? Back to School Expenses?
  • No Emergency Fund
    Unexpected things happen, and for the big “oh-no’s” (house/car repairs) you need an emergency fund. If you don’t, your budget will be ruined by trying to pay for the emergency. Or even worse, you will pile on more debt, get discouraged and give-up on finances.

Life Changing Budget Advice

Finally, when we went through Dave Ramsey’s, Financial Peace University, I was given the common sense I needed all this time. Simply put, every month is different and therefore every month has a different budget! Brilliant, yet I wanted to slap my myself and say “why didn’t I think of that?”

Also, unexpected things happen and you don’t just give-up. You can adjust your budget mid-month. Another no-brainer. But I had never thought of it that way.

Let’s say you forget to budget for school pictures. No worries. You simply change your budget to make it work. If pictures are $30, then you need to find a category (or a couple) you can decrease by $30 for the month. Be sure to write ALL changes in your budget immediately, because you will forget about them!

Create a Budget that Works!

How to Create a Budget that Works

Are you thinking, “Great, but Where do I Start?” First collect last month’s pay stubs and bank and credit card statements.

1.  Income: Take  your pay stubs and determine your total take-home pay. Write it (or type it) on your budget. You can use Dave Ramsey’s FREE monthly cash flow form or here is a simplified Pre-Budget Worksheet (printable download) I have created, or make your own spreadsheet!

2.  Previous Month’s Expenses: Where did you spend your money? Look at the different entries on your statements. Categorize your expenses by budget titles (Groceries, Restaurants, Entertainment, Clothing, etc.).

3.  Time to Make a Few Cuts? Now that you have all of your expenses in front of you, you may be shocked to know how much you spend on food, or coffee, or clothes, or utility bills. This is the time to decide which categories need to be trimmed down, in order for you to win with money! Although it is great to make cuts, be realistic.

4.  Create a Budget: After you have gathered all your information and decided where to make cuts. You need to make a zero based budget for the upcoming month. Meaning, every single dollar of your income is spent on paper first. Your total income minus your total expenses (giving, saving, and spending) equals ZERO. Every dollar needs to be assigned to a budget category.

Budget Forms: You can use this simplified one-page Budget (printable download), use Dave Ramsey’s Budgeting Forms, or create your own spreadsheet.

Tips to Create a Budget that Works for You

  • Work Together: If you are married, it is so important that you and your spouse sit down and do your budget together. If both spouses are not on-board with the budget, it will fail before it starts.
  • Remember Every Month is Different.
  • Encourage Yourself to Keep Budget Meetings: We did this by going out to coffee or frozen yogurt while we hashed out our budget. This was a special treat at the time because we had trimmed our restaurant fund to a bare minimum.
  • Remember Budgets Can and Should be Adjusted throughout the Month
  • Budgeting is a New Skill: It is going to take some time to “master.” When we first began preparing monthly budgets it would take about 45 minutes,now it takes 10-minutes.
  • First Three Months are Most Difficult: Your first budget (or two) will probably be a mess. You WILL get much, MUCH better at budgeting. STICK WITH IT!

If you have visited Budget Loving Military Wife before, you probably know “Our Story.” My husband and I have made dramatic changes in our finances. The key factor to our success… We Create a Budget that Works for Us! We have experienced so much SUCCESS from simply taking a little time each month to create a plan. You will be amazed by your financial transformation, when you create a budget that works for you!

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How We Live on Less than HALF of One-Income (& Why?)

Budget Loving Military Wife



We live extremely frugally on less than HALF of our one income. Before moving to England, we lived on half of our two incomes.

We were not this frugal 3 years ago. We were like everybody else, spending majority of what we made and saved a little for a rainy day. Oh yeah, not to mention that pile of debt we had to dig ourselves out from under.

We did not decide to live on half of our income over night. We slowly and gradually decreased our expenses. We learned to live with less and we noticed how happy and content we became with less.

We still have our “I want” moments, but they are much less often and we typically do not give them a second thought. We have developed bigger “wants” that always win over the temporary indulgences. We want to be 100% debt free. We want a comfortable retirement. We want to vacation and experience the world around us.

Minimalist Living

Through the months of paying off $48,000 in consumer debt we whittled down our expenses to half of our income. It was not a conscious decision, but simply trying to squeeze out every extra dollar to apply it to debt.

Once we moved to England and this type of minimalist living was more “normal” we took off the reins and went all out. We were no longer worried about seeming “crazy” with our frugal lifestyle because all of a sudden our “crazy frugal living” was “normal.”

Our One Income

Although our single income is not extravagant and it is less than our combined two stateside incomes, it is enough to live on. If you have been a reader at Budget Loving Military Wife for a while, you know we do quite well with living on one income. We pay extra on our debt and we travel quite often.

I will not share specifics of my husband’s income, but the salaries and benefits of U.S. military are publicly announced. So, if you are curious enough, there are online calculators that would give you a good idea.

How We Live on Less than HALF of One Income

We slowly shaved down our monthly budget to absolute minimums. We clearly define our wants and needs. We budget every month and we use cash, to make going over budget impossible. We purposefully budget and spend every single dollar.

Our Monthly Living Expenses:

Rent: $1944
Rental Insurance: $15
Dental Insurance: $11
Gas/Electricity: $107
Water: $70
Phones: $81
Internet: $26
Groceries: $220
Restaurant/Entertainment: $100
Gasoline: $200
Car Insurance: $55
Road Tax: $38
Car Repair/Maintenance: $100
Miscellaneous: $100
Fun Money: $80

Total: $3147

As you can see rent is over 60% of our expenses. If there was not a ridiculous “use or lose” policy with our rent money then you better believe we would live somewhere less expensive. Rent is quite expensive in England, but we could probably find a place that would meet our needs for $500/month less.

For many expenses I have used averages. There are many months we don’t spend this much. Over a year’s time, our living expenses are approximately $38,000 to live in England. Not too shabby to be living well on 70% of a median American income, in a more expensive foreign country!


Why We live on Less than HALF of One Income

We want to minimize our money waste in order to save and reach bigger financial goals.

Debt Freedom: At this moment in our lives, I don’t think there is anything we want more than to owe NOTHING to ANYONE! We want our financial freedom so bad and we are willing to sacrifice to get there!

Vacationing: We were given this once in a lifetime opportunity to live overseas. We have made it a priority to take advantage of this opportunity to see the world around us. This experience has completely shifted my perception of the world and my life in the U.S. This experience has blessed us well beyond any monetary value.

Donations/Volunteering: We also want to give when we are called to do so. We don’t want our finances holding us back from changing the world around us.

Our Future: We want to invest into our future. We do this by contributing to retirement funds and paying for my husband’s college education.

These categories are where the other half of our one income is dispersed. These are the bigger “wants” that trump the restaurants, expensive entertainment, latest and greatest tech. toys, newer car, and other splurges. We have prioritized our wants, have you?


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Do You think it is Possible to Live on HALF of Your Income?


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Tips to Plan a Budget on a Low Income

10 Steps to STOP Living Paycheck to Paycheck

I receive so many questions from families who are barely making ends meet. Who are living paycheck to paycheck. They are in survival mode and are desperate to have less financial stress.

Although this article is written with the young military family in mind, these tips can be implemented in any household that is struggling to make ends meet.

Step 1: Attitude and Behavior Change

You are reading this article, so I am guessing your have had it! You are done living paycheck to paycheck and having the financial stress that is keeping you up at night. Congrats on taking this first step!

Changing your finances, requires a complete shift in your thoughts about money and how you manage it. Take a deep breath. Stop living in crisis mode. Everything WILL be okay if you develop an action plan.

You are going to have to take a long hard look at yourself. Are you clearly defining “wants” from “needs.” Do you have what it takes to tell yourself “no” and sacrifice whatever it takes to win?

Your previous attempts to manage your money are NOT working. It’s time for that behavior change and developing new and effective habits.

Step 2: Spouses are on Same Page

You are tired of living paycheck to paycheck and are ready to do anything and possibly everything to get your finances on track? Does your spouse share these feelings? Does your spouse know the specifics of the family finances?

Set up a “financial date” with your spouse. Meet in a relaxed setting away from the every day stress and distractions. Judgment, past mistakes, and any and all agendas are not invited to this “date.”

Talk about your financial dreams. How would it make you feel to accomplish these dreams ($1000 emergency fund, debt free, investing for retirement, etc.)? How important is it to you to have financial security? For example, having your husband go to your company Christmas Party is a 3, but financial security is a 9 on a scale of 10 for importance to you.

If your spouse is unaware of your finances. Let him/her know why you are worried about your finances. Tread lightly if your spouse is the “bread winner.” You don’t want to bruise his/her ego because they are unable to “provide.”

Once you both have an understanding of why it is important to get your finances on track AND you are both ready to do something about it. Then move onto the next step.

Step 3: Stop Using Debt & Take Inventory

Take out those credit cards out of your wallet. No more purchases will be made using debt.

Then determine your Income, Savings, and Debts. Write them down or input into a spreadsheet.

Example: Military personnel (E1 rank) and spouse, living in Eastern WA state

Budget Example (4)


Step 4: Determine Survival Expenses 

This is the start of your budget. These expenses are required to “survive” and to attend employment to produce further income.  These expenses include: food, shelter, utilities, transportation expenses to work, and very basic clothing. Write down or input into a spreadsheet your own “Survival Expenses.” Here is a FREE “Allocated Spending Plan” (google doc.) to budget for each paycheck or visit Dave Ramsey for FREE budget forms.


Budget Example (1)


*This is a small Grocery Budget. You will need to Meal Plan with Budget Friendly Meals, Coupon, Stay away from Expensive convenience foods (pre-packaged/pre-prepared meals), Cook from Scratch, Buy Generic Brands, and Avoid Food Waste

*Rent: You may be able to save further money if you find a room to rent in someone’s home.

*Utilities: Consider all expenses before renting an apartment. Many places will include some or all utilities.


Step 5: Determine Necessary Expenses:

These expenses are necessary to prevent further debt and to ensure your employment. But you could “survive” if absolutely necessary without these expenses. These expenses include insurance, child care, phone, some utilities, and debt repayment. Write down or input into a spreadsheet your “Necessary Expenses.”


Budget Example (2)


*Phone(s): Cheapest plan available (prepaid plan or even a landline).

*Garbage: You could haul your trash to the local dump or come up with a arrangement with a neighbor to eliminate or greatly reduce this expense.

*** If your income does not cover ALL of your “Necessary Expenses” you need to prioritize this list. Determine which expenses will be paid with the remainder of your income. You will need to do everything in your power to increase your income and reduce any expenses possible. Get creative and remember “where there is a will, there is a way.”

Step 6: Determine Optional Expenses

These are the expenses that you don’t necessarily “need.” These expenses will vary from household to household. With only $338 left and no emergency fund to speak of, I am going to be very, VERY selective in what I choose as optional expenses. If you have no further income to spend or if you are behind on your bills then you stop here and eliminate all optional expenses. Let me repeat, You will NOT have optional expenses. Pay your bills until they are current. Work to reduce your expenses and increase your income.  Write down or input into a spreadsheet your “Optional Expenses.”


Budget Example (3)


Step 7: Determine Financial Priorities

You NEED to have an emergency fund. A very minimum of $1000. Work your way up to 3-6 months of expenses. Then you will work on your financial goals as you prioritized them.


Budget Financial Priorities

If I woke up in the Example’s Shoes:

My first priority would by my Emergency Fund (I currently have $0): Save $278 + any penny I can scrape up.

-After 4 months without any major emergencies, I should have the $1000 emergency fund. I ONLY use it for emergencies (car repairs, medical expenses, deductible if in car accident, etc. )

After funding my Emergency Fund, I would Pay-off My Debts as quickly as possible.

-Start with the credit card with the lowest balance. I will pay the minimum (I’ve been paying this all along) + $278 + any penny I can scrap up. I use the snowball method. Once this debt is paid off, I use all this money to pay off the next credit card, then my car loan, and then finally my student loan.

-Try out this basic Debt Snowball Calculator   to determine your debt pay-off date.

After my Debt is Paid Off, I will have an “extra” ~$800. I will minimally increase “optional expenses” and boost up the emergency fund.

Step 8: Speed Up The Process

If I stuck with the above plan. Although it is a good plan, it would take me 7 years to pay off the debt. 7 YEARS!!! I scream “NO WAY” back at this possibility. So I’m going to dig deep and do everything in my power to speed up this process.

  • Sell things via Craigslist, Ebay, Facebook pages, Yard Sale. Sell anything that is not essential or that we don’t regularly use.
    • Items I could currently sell: Kitchen Table, GPS, smart phones, Bookshelves, Books, Mirrors, Home Decor, Kitchen Appliances (mixer, waffle maker, electric skillet), Serving Platters, Desk, Desk Chair, Like New Shoes & Coats.
      • Keep in mind my husband and I got rid of half our belongings with the move to England and I still came up with a good list of things we could sell. Probably bringing in ~$400.
  • Extra Income: get 2nd and 3rd jobs if necessary!
    • Perhaps we could Babysit evenings & weekends, Walk a couple of dogs, Rake leaves or Shovel snow, Clean a house or two once a week. There are lots of possibilities.
      • Let us assume between my husband and I we could bring in an “extra” $600/month.
  • Reduce Expenses: We already live on a very strict budget. But let us say I get really good with our grocery budget and can reduce it by $30. We find cheaper ways to have “date night” and spend $30 less. We reduced our energy use and saved $20. We also carpool more frequently, saving $50.
    • Total Savings from reduced expenses: $130

By increasing our income and reducing our expenses with the above examples. We can now pay off our debt in 2.5 Years! I like the sound of that much better!!! Plus you have to remember, you will be receiving income raises during this time so you will pay it off even faster!

  • Extreme Changes to Expenses: Perhaps once you have your budget in front of you, some of your expenses are just too high for you to make any ground on your financial priorities. It may be time to take dramatic measures.
    • Move! Find a cheaper apartment to rent. Perhaps live in the basement or in an above garage studio of someone’s home.
    • Sell Your Car! Use public transportation or buy a much cheaper car. Keep in mind fuel efficiency and possible repairs!
    • Get a Roommate! Do you have an extra room? Rent it out!

Step 9: Need Help? Ask for it!

If you have a low income, chances are you will qualify for aide programs. There are many state and non-profit programs that could possibly help you get yourself back on your feet. These programs can sometimes provide assistance with food  and utility expenses. If you are a military family contact your installation’s family readiness group/center. If you are a civilian family contact your local Food and Nutrition Services  about programs such as WIC and SNAP. Contact your energy provider and inquire about assistance programs.

Contracts: If you are in a contract (cable, internet, phone, etc.) and are having a difficult time paying your bills. Please contact that company directly. Inform them you are experiencing financial difficulty and are not able to pay your bills at this time. Request your contract be placed on hold for 6 months. Double check that you will not be charged fees. If the company allows your contract to be placed on hold, you will then have this time to get your finances on track. Once the 6 months has expired, you will then have to finish out your contract. Determine if paying the early termination fee would be worth it.

Family Member or Friend: At times you will need moral support to get through this journey! If you have a family member or friend who lives a frugal lifestyle or is also getting their finances on track. Reach out to them and request moral support.

Step 10: Stick With The Plan and Never Live Paycheck to Paycheck Again!

This journey will NOT be easy! You are changing your attitude and behaviors regarding money.  The first 3 months will be the most difficult. But It WILL get easier.

As you begin to have a savings account and stop living paycheck to paycheck you will feel so much weight lift off your shoulders. There will be set-backs, but you just keep pushing forward because nothing is going to stop you from financial security. With each accomplishment, you will get more motivation to continue this journey. Keep going! Your debts will become less, your income will become greater, this difficult journey will be behind you, and your financial future will look so, SO AMAZING!


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Do you have inspiration for those currently living paycheck to paycheck?

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