Around early October — this is when the stores are full of pumpkin carving kits and bite sized packs of Snickers bars — you will see the first sign of the retail Christmas season. In some stores this will be just a peak; a few feet on an aisle where you can buy garland and lights, whereas other retailers will dedicate one side of the Halloween aisle with wrapping paper and bows; just waiting for the first of November when they can evict Halloween and get the inflatable reindeer on the shelf.

Then Halloween which means that Christmas has officially begun — and yeah, there’s Thanksgiving in between and you’ll see displays for Stove Stop Stuffing and premade pie crusts, but Christmas is the real rock star of retail.

Now, if you’re paying attention, this is also when you’ll see the very beginning of the retail tax season. In between the commercials for the hottest door buster bargains, you’ll see the first tax commercials. Small and spread out. Just a few and usually from H&R Block who have significantly bumped up their marketing efforts over the last few years. And these ads will be about how much money you’re not going to get back by using other tax preparers.

These are the teaser adds. Little reminders dropped in amongst the Christmas cheer to get you to start thinking about your taxes.

Then comes Christmas. Then New Years which means that the retail tax season has officially begun. Now the ads will pick up. H&R Block will tell you that you will lose a fortune to the Government if you don’t set up an appointment with them today. Turbo Tax will tell you that it’s so easy to do your taxes at home with their software, any child could do it.

These efforts will increase through TV ads, the internet, those inflatable air dancers you see in parking lots along with guys dressed in Uncle Sam costumes waving large arrows that tell you to hurry up and pull into this shopping center right this second and get your taxes done.

Now what’s interesting is, that at this point in the season the marketing is to get your tax preparations business. After that it begins to switch.

When March comes so does the shift. Now you’ll see new ads migrate from those who want to file your taxes, to those who want to help you spend your tax return. This is when you’ll see car lots offer to do your taxes for you and use the tax money on a new car. You’ll see furniture outlets do the same thing and charitable organizations will ask you to donate a portion of that return. And throughout the month this will get bigger and bigger until the middle of April when the bubble will pop.

Now, the dangerous aspect of these ads — as well as how the retail tax market works — is that all of these efforts are based on one interesting premise. That you look at your tax return money as — found money. As extra money. As money that fell from the sky and now you are looking for a way to get it all and then spend it fast.

Which is perfect. And the retail world is more than happy to help you do that — spend it on a new car, the latest iPhone, furniture, a trip because — well, by gosh, you deserve it.

But here is the boring truth about your tax return.


Here it is.

Your tax return is not found money.


No. It is not.

You didn’t win the lottery. You didn’t find that money on the street and you weren’t given it by a rich uncle. This money, this tax return, is your money that you earned as salary and it was held — in effect, taken from you — until you could document why you should have some of it back.

It’s not separate from your income in any way. It is your income.

Which means that it still falls under the rules of your income.


Since this tax return is your income in a lump sum form, the rules you’ve established for your income will apply to your return. And the first rule of your income is …

  1. Pay yourself first. No, you shouldn’t blow the tax return, but sticking it all in an account is just as bad because it will soon widdle away and be gone. Like your income, there needs to be a purpose and plan to your money. So, like you do with your paycheck, pay yourself first. This is your income and you would have taken a percentage of it from your salary if these taxes weren’t held. So, if your weekly spending money is 10% of your check, then take 10% of the return and pay it to yourself. And no, this doesn’t mean blow it, it means that this portion of it is your money. It would have been yours if taxes weren’t taken out so it’s yours once they were given back.
  2. Start, or add to, your emergency fund. What happens if you get in an accident and need to cover your deductible? What if you lose your job or get hurt? The general rule of thumb regarding an emergency fund is that it should be six to eight months of your salary. Now your tax return may not be that much and that’s fine, all you want to do is add a portion of the return to the fund to build it up. Create an interest bearing savings account that is only used for emergencies and then add to it each paycheck.
  3. Pay off or pay down, high interest debt. If you are carrying high interest debt, your emergency fund will be eaten up pretty quickly. Create a plan to eliminate this debt. Again, if your return can’t pay it all off, pay it down and create a plan to not acquire any additional debt and pay it off.
  4. Buy what you need. Do you need new tires or is your water heater on its last legs? This is the time to get what you need; those things you’ve been putting off. Pay cash and get that new car battery or replace the broken washing machine.

Stick to these basic rules and treat the return for what it is. Part of your income given back to you in one lump sum.


Everett De Morier has appeared on CNN, Fox News Network, NPR, ABC, as well as in The New York Times and The London Times. He is the author of Crib Notes for the First Year of Marriage: A...