So last week I spoke about budgeting categories and this week, in honor of that big fat check that hit our checking account, I’m talking about… Tax Refunds!
So luckily husband and I have for the past few years received a tax refund. They have varied in size. Every financial guru will tell you… fix your withholding so you get either a very tiny refund or have to pay a very tiny amount – if not, you are giving the government a free loan for them to make interest on.. when you could be receiving that money every week/monthly on your paychecks!
And I certainly am all for that – if you have the self-discipline to put it in a savings account or investments that will yield a return. If not, sometimes you might be better off getting a refund.
In our case, we had enough deductions and credits from property taxes (city and county), tuition, and medical bills, we were able to receive a refund.
So what should we do with it?? Well once our CPA did our taxes and showed us our refund amount, we immediately decided that 1/2 was going to savings. We have been trying to build up our emergency fund (we have a specific # we are trying to reach before trying for a baby!) so that made sense. With the remaining amount, we are splitting it between our credit card and car loan.
We unfortunately have a credit card balance due to a few emergency situations that occurred back to back so our emergency cash was already wiped out (hence why we have set a specific # before having a child – we know what emergencies can do!)
Normally during this time of the year, we use our refund to take a very nice vacation for our wedding anniversary since our savings is normally up and debt is normally $0, but this year our goals are bigger than a vacation so we are forgoing that and opting for a nice dinner and couples massage and putting the refund to (what we consider) good use.
Do you receive a refund? If so, what do you have planned for it’s use?