5 Ways We Plan to Use Our Tax Return To Help Our Bottom Line

My husband and I get a sizeable tax return each year because we have three children and don’t currently have a great income.  (I do look forward to the day when we get a much smaller tax return!)  Since our returns our so sizeable, we are currently analyzing what to do with them.  For this year, we plan to

1.)  Further Fund our Emergency Savings.  The economy is still unstable, and now that I am quitting my job and my husband is just entering the job market with his Ph.D., we don’t really know what the future holds for us.  We are investing a portion of our tax return into our emergency savings account.  The larger that fund is, the better we will be able to weather whatever comes our way financially.  Because we have three young children, I want to make sure we have a sizeable cushion.

2.) Put It Aside for Our Son’s Summer School.  Our son will attend a Japanese summer school (at the same school where he attended preschool and kindergarten) this summer.  He will go for 8 hours a day; 5 hours a day he will be immersed in the Japanese language.  This school is not cheap, but as my husband’s entire family still resides in Japan, it is well worth the investment.  I love that he can talk to his Japanese grandparents on the phone in Japanese.  (They don’t know any English.)

In the future, hopefully next year when my husband is employed full-time and we are more financially stable, we plan to do the following things with our tax return:

3.)  Contribute to a Roth IRA.  Until we get back on our feet financially with a strong income base, we will use part of our tax return to partially fund a Roth IRA.   Meanwhile we will be contributing to my husband’s retirement fund at his place of employment, and once I officially leave my job this year we will roll my retirement into an IRA.

4.)  Pay Down Student Loan Debt.  Grad school is expensive.  I still have a fairly small student loan I am working on and my husband will graduate with a much bigger student loan.  We will use part of our income tax each year to accelerate our repayment by supplementing our regular monthly payments.

5.)  Save for a House.  Both of us would like to have 20% down when we buy a house, so we will use a chunk of the income tax return to begin saving for a house.  I would like to buy a house within the next three to five years, once we are able to move to a quieter location.

What do you usually do with your tax refund, if you get one?

I shared this post at Works for Me Wednesday.

Comments

  1. Michelle says:

    REFUND???? What is this thing you call a refund??? 🙂 As DINK’s (double income, no kids), we pretty much ALWAYS have to pay in. This year’s bill was going to be under $1,000 (in addition to our normal & EXTRA withholding from our checks) until my husband’s company did a late December dividend payment that we weren’t expecting. So now we owe even more 🙁

    However, if I were to get a sizeable refund here’s what I’d do:
    1. Adjust my withholding for the next year – no sense in giving the government an interest free loan.
    2. Pay off any outstanding balance on the credit cards. We usually try to pay them in full every month but every once in a while we have a heavy charge month like this month – buying 6 plane tickets for known future trips before prices went up even more.
    3. Put some aside in our house account – used for the mortgage, utilities, and home improvements/repairs.
    4. Put some aside in the new car fund.
    5. Put the rest into the savings account except for #6
    6. And for my instant gratification fix – a girl could always use a new pair of shoes (or two or three) or a new purse 🙂

  2. I think it’s great that you’ll be using that refund to pad your emergency fund and in essence build your wealth. I won’t be getting a refund this year (at least I don’t think so – still have to do those darned taxes!) but as long as I don’t have to pay, that’s okay with me. 😉

    • We have adjusted our withholding to try to limit our tax refund, but with the child credits, we almost always get one. You are right that breaking even is better than owing. 🙂

  3. We usually get a pretty big refund too. We’ve adjusted our withholding as much as is allowed, but because of the way my husband gets paid, way too much is withheld. We usually will put the refund towards whatever “Baby Step” we’re working on. We’ve paid off debt. We’ve topped off our Emergency Fund. This year we put it towards the purchase of a “new” car. I think it’s great that you’re using it to meet your Financial Goals!

    • Yes, we need to start a new car fund. Our car is 6.5 years old and has 90,000 miles on it, so we need to start saving.

  4. We have increased our exemptions (I think that’s what they are called) to the largest number we can without having to fill out a form for human resources at my husband’s job. I actually had my husband fill out that form too, but he never turned it in – he needs to do that! So, we do get back a sizable refund. But, it’s built into our budget already. This is the first year that we have come up with a realistic budget that we are trying very hard to follow. Our refund was a little larger than I expected, so we are taking the excess and putting it into our savings/emergency fund.

  5. We try to be responsible anytime we get a refund. Each year we just aren’t sure how things are going to swing. We did get a refund this year and we have set aside money for mostly responsible things.

    We were upside down when we bought my car and we only traded initially 3 years ago due to the cost of gas and I had an Expedition and my husband had a F150 so I traded to get a fuel efficient Jetta. We set aside some money to bring us up to not being upside down (and I am glad to say we are almost there). We are trying to decide what the next step is with the car situation and it is too long to type but we are working on making a financially smart decision.

    We used part of the money to put a little bit in our kids savings.

    We used part of the money to do some home renovations on improving our home.

    We were planning a trip home from AZ to TN so we set aside money to pay cash for our plane tickets.

    We put some of the refund into our savings account.

    Our vehicles needed some maintenance so we took the opportunity to get this completed and paid cash for new tires.

    My husband also has been waiting and bypassing any gifts for Christmas or his birthday so he can go on a hunting trip this year and so we set aside some so we can pay cash for this trip.

    I didn’t do any instant gratification this year although we normally do allow a small amount for each of us but this year there wasn’t anything I really really wanted.

  6. we have been very fortunate to have all our debt gone except the house. We have 4 kids, and a nice bonus–in which they tax the crap out of, which means we got a nice return this year… We have taken all our return and put it in savings. But, I will be taking a bit out to continue our goal of painting the inside of our home. (The previous owners did a TERRIBLE job painting!) Also, I am thinking a pair or two of girlie shoes would be perfect!

  7. We have two kids, so we always get a good sized return. We usually make a purchase that we need for the house – last year it was a new washer and dryer. We also put a deck on the back of the house, which my husband did himself and we figured would be good for raising the value of our home. This year we splurged and bought ourselves a new bedroom set (we’ve been using the mismatched pieces and bed with no headboard that my husband has had since he graduated from high school 12 years ago). The rest of the money is going into our emergecy fund, with the thought that some is going to have to come back out to buy a new hot water heater for the house.

  8. We already got ours, and it went towards our current debt snowball (HELOC),-paying it off.
    Now we just have one student loan and our mortgage, and the plan is to be totally debt free in 10 years 🙂

    • Good work! I am thinking debt free in 10 years means no mortgage. That would be fabulous!

      • Yep-the mortgage will be toast in ten years, if everything goes according to plan 🙂 We refinanced our 30 year about a year and a half ago, to a 15 year, and locked in on a 4.25% fixed rate! We have a little less than 14 years left on it, but want to have it gone within 10.

        We’re taking some time off of our debt snowball right now, to focus on other things, but will start hitting the student loan hard next year around this time, and plan on having it gone by tax time 2014. Then we’ll focus on the mortgage.

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