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By the end of September, millions of Coloradans will receive a check from the state’s Department of Revenue. It’ll be a sizable chunk of change: $750 for individual tax filers and $1500 for joint filers. These funds, known as Colorado Cash Back Checks, are a stipulation of the Taxpayer Bill of Rights (TABOR), which caps the amount of revenue the state can keep and spend each year. The checks heading to mailboxes now are a refund of state revenues that exceeded the TABOR limit during the state’s last fiscal year. (Learn more about Colorado Cash Back Checks and who qualifies for them here.)
Centennial Staters receiving this windfall, which includes all adults who lived in Colorado for the entirety of 2021 and filed state income tax returns for that year or applied for certain state rebates, will be faced with a decision: How best to use the funds? Should you, for instance, buy an Epic pass? Splurge on that new gravel bike? Stash it in the bank until inflation (hopefully) subsides?
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We sought advice from local finance whiz Zachary Bouck, chief investment officer at Denver Wealth Management and creator of the Mind of a Millionaire podcast. Here, Bouck’s tips for using your TABOR refund wisely.
Pay Off Your Debt
Colorado has the 10th highest rate of credit card debt in the country, with a median debt of $2,646, according to a 2022 study by WalletHub, a personal finance site. Given that the average credit card interest rate is between 15 percent and 19 percent, that debt can quickly snowball. So, while it’s not as fun as booking a weekend in Crested Butte, the first thing you should do with extra cash is pay off any high-interest rate debt, like credit cards or car loans, or any past due bills. “Clean up your financial house first,” Bouck says.
Pad Your Emergency Fund
Once you’re up to date on all your bills and free of any high-interest rate debt, you should then make sure you have an emergency fund. This fund amounts to a stockpile of dough that could cover three to six months of your expenses, Bouck says. An emergency fund can come in handy when you’re faced with unanticipated expenditures, like car repairs, medical bills, or a sudden loss of income. According to Bouck, ensuring a healthy emergency fund and paying off your debts are “non-negotiables.”
Consider Long-Term Investments
OK, so you’re debt-free and have a sizable emergency fund. Good on you! Now you should consider using your TABOR refund money for long-term investments. “Depending on where you are in your financial life, that long-term investment could be saving for kids’ college or it could be saving into a Roth IRA for retirement,” Bouck says. Again, not sexy; just smart.
So long as you’ve cleaned up your debt and built a good emergency fund, if you want to spend your TABOR refund on an item or experience that’s just for you, then go for it. “I’m a big fan of splurging financially,” Bouck says.
As for which items or experiences are best to splurge on right now given historic inflation rates? “I don’t think inflation really plays into it at all,” Bouck says. “We don’t really know where inflation is going to be a month or two months from now. You could see the price of physical goods go up, you could see the price of physical goods go down. There’s a lot of evidence you could point to in both directions that that’s going to happen.”
Given that uncertainty, Bouck advises doing whatever makes you happy—whether that’s buying Red Rocks tickets, a getting new ski rack for your car, or purchasing a membership to your local climbing gym, or even being charitable. At the end of the day, “money is just a tool to enjoy your life,” he says. How you choose to spend your money—including the TABOR refund—is up to you.