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.