Wisdom-Trek / Creating a Legacy
Welcome to Day 813 of our Wisdom-Trek, and thank you for joining me.
This is Guthrie Chamberlain, Your Guide to Wisdom
Spend or Invest? - Ask Gramps

Thank you for joining us for our five days per week, wisdom and legacy building podcast. This is Day 813 of our Trek time for our Philosophy Friday series.  Each Friday we will ponder some of the basic truths and mysteries of life, and how they can impact us in creating our living legacy.  As we continue on this trek called life, sometimes we have questions about life, so our Friday trek is a time where we can ‘Ask Gramps.’   Gramps will answer questions that you would like to ask your dad or granddad, but for whatever reason, this is not possible.  No matter how old you are, I know that all of us would like the opportunity to ask dad or gramps questions about life in many areas.  We will address areas such as finances, relationships, health/fitness, business/work, home repairs/renovations, seasons of life, spiritual/Biblical questions, and any others areas that come our way.  As your fellow sojourner and mentor on this trek that we call life, it is my goal to provide you with practical wisdom and advice about any area of life. It is crucial that I receive a constant flow of questions so please submit your questions to guthrie@wisdom-trek.com, and I will answer your questions on our Friday podcast.

We are broadcasting from our studio at ‘The Big House’ in Marietta, Ohio.  In the United States, most individuals are gathering together their financial and tax-related documents so they can prepare to file their tax returns.  So the question for today is:

Hey Gramps, “I have completed my tax return and am going to get a sizable refund.  How should I spend or invest this money?”
Spend or Invest?
The first thing that comes to mind when I hear this question is why are you getting a sizable refund?  Yes, it is nice to get a big tax refund, but if it is because you had more taken out each pay period than what was needed, then you have loaned the government money all year without getting any interest paid for the use of your money.  The IRS does not mind providing refunds to individuals because it allows them to use billions if not trillions of dollars per year without having any interest due.   If a large refund is a regular occurrence for you, then my first recommendation would be to adjust your withholding so that you are not getting as large of refund.  The objective should be to break even if possible. This will require that you are disciplined enough to set aside that same money each pay period and place it in a saving account where you can earn interest on it.  Then you will have both the amount of your refund and at least a little bit of interest.

Second, there is a big difference between spending and investing your tax refund.  I prefer to have the mindset of investing in all things, whether it is money, time, talents, or any other resources.  When you invest, there is a multiplying effect of what you are investing so that you end up with more than you started with.  For example, when you invest time by positively impacting the lives of others, then that time is multiplied many times over as it will not only impact that person, but also everyone that they impact.  It is the compound effect, just like earning more interest on money that is already earning interest.   When you have the mindset of investing instead of spending, this multiplication principle comes into effect.  Here is another way to think of it.  Say you had 100 grains of wheat.  You could eat those grains of wheat to satisfy your hunger today, or you could sacrifice today and plant those 100 grains which could result in 100 to 400 times what you started with.  As with most things in life it boils down to the laws of planting and harvesting. You have to be willing to sacrifice today to benef...