I just got an email from CheaperThanDirt.com with the title “Spend Your Tax Refund With Us”.

While I understand their marketing sentiment, I’m going to request people to NOT spent their tax refund with them. Nothing personal against CTD, but I think that one’s personal finance should be more responsible.

Actually it’s interesting. Just yesterday I saw this article on Cracked.com about “The 5 Stupidest Habits You Develop Growing Up Poor“.

#4. Extra Money Has to Be Spent Right Goddamn Now!

Every poor person I knew got a big check one time a year in the form of their tax return. They made just enough money to file taxes, and made little enough to claim “earned income credit,” which is a tax credit that can dramatically boost your return. For my ex-wife and I, it meant getting around $5,000 at the end of January. And just like many poor people, we’d be broke within days of cashing that check, our living room sporting a new TV. Or we’d replace our old computers and all of our furniture. There’s a reason many poor people blow through that money instead of saving it for future bills.

[…]

When a windfall check is dropped in your lap, you don’t know how to handle it. Instead of thinking, “This will cover our rent and bills for half a year,” you immediately jump to all the things you’ve been meaning to get, but couldn’t afford on your regular income. If you don’t buy it right now, you know that the money will slowly bleed away to everyday life over the course of the next few months, leaving you with nothing to show for it. Don’t misunderstand me here, it’s never a “greed” thing. It’s a panic thing. “We have to spend this before it disappears.”

I totally understand the mentality. Been there, done that.

The truth is, you will have something to show for it. It may not be some big screen TV or a car, but you can still show something for it.

For example, do you have debt? How about paying down that debt, especially if it’s high-interest debt such as credit cards. Of course, it then requires you to have enough discipline to not get back into debt thinking “gee, I have lots of unused credit on my credit card, shopping spree!”. Been there, done that. You just wasted all of your money and are going to be worse off.

If you don’t have debt, how about saving that money? Rainy days happen. Or perhaps better, see about investing that money, putting it to work for you and growing it. If you want to try that but aren’t sure where to start, consider index funds. No, overall not the best investment vehicle, but they can be a good way to start, take a lot of mystery out of things, simple enough, and get your ball rolling.

Or even better… try to see if you can adjust your tax situation and withholding and such so you strive to come out even on your income tax return. Don’t give the .gov a no-interest loan of your money. It is your money, you should hold onto it and make it work for you. If we go back to that investment consideration, perhaps the extra money you get in your paycheck after adjusting it, since you’ll be used to not seeing it anyways, just turn that money right around into investments. Investing that money every paycheck, over time, will add up into bigger and better things for you.

I do understand a desire to “spend your tax refund”, especially because it’s a big fat check and the windfall is nice. But it’s better to hold onto your money instead of forking it over to someone else, and work to develop the discipline and responsibility to save up that money over time yourself, invest it, and work to grow bigger things. You will have something better to show for it.