What to do with a tax refund~

Discussion in 'The Watercooler' started by hearts and roses, Feb 19, 2010.

  1. hearts and roses

    hearts and roses Mind Reader

    I just learned today that I will owe the feds $116 but my state will be refunding me $900. I am torn on what to do with it. Here are my option:

    1) Pay down a bill.
    2) Put in savings towards our ongoing upper level addition.
    3) Splurge it all on a getaway for H and me.

    I am paying my bills and my head is above water. I've figured out a plan to pay down some debt slowly but surely and I'm making progress (slowly but surely).

    The addition project came to a standstill due to winter and lack of funds. Our hope is that once it warms up a bit, H can have his electrician friend who is working on barter and the plumber ($3000) come over and then H can proceed with the rest of the work himself as financials and time provide.

    We haven't take a vacation in what seems like eons and we could zip down to FL to spend some time with his parents and also get a bit of time on our own, which would be nice. on the other hand, the last time I took H with me to FL on business, he was an absolute pill the entire time. I don't want to waste this small bit of money getting away only to spend with his parents and H being a pill. I could put it away and earmark it for a truly spectacular vacation later in the year after adding to the vaca fund.

    So, what would you do? And, for those of you receiving a refund, what are your plans?
  2. mstang67chic

    mstang67chic Going Green

    We are actually getting money now from husband's bonus and will be getting a tax refund, I just don't know how much. I think for us, we're going to pay some bills (and possible pay ahead on one or two), take care of some needed issues with the house and/or cars and then see what's left. husband is drooling at the thought of a flat screen so I have the sneaking suspicion one is in our future. LOL

    As for you....I would be torn. If you're above water with everything, I'd be tempted to either put it back or do something fun. Then again, the sooner you pay the bill down or off, the sooner you can use that money for other things.

    Maybe you could split it? Put some on the bill and do something fun with the rest?
  3. flutterby

    flutterby Fly away!

    I always put mine toward bills, but it was always out of necessity. In any case, having bills hanging over my head causes a lot of anxiety for me so I would still do that.

    It depends on what you will feel best about doing. If you take that vacation are you going to be worrying about the bills? If you put it toward the bills, are you going to be wishing you had taken the vacation?

    I've never done an addition so I have no thoughts on that part.
  4. busywend

    busywend Well-Known Member Staff Member

    How high is the interest on your debt?
  5. gcvmom

    gcvmom Here we go again!

    You forgot option FOUR:

    Send it to me! :bigsmile:
  6. hearts and roses

    hearts and roses Mind Reader

    I could pay off my stupid Macys store card (22%)completely with less than half of that money and at least I'd be rid of that.

    Then, instead of paying that money to Macys, I could divert those monthly funds towards another bill I'm paying off (Kohls-21%).

    That would leave me with about $450, which I could stash away in the vaca fund and *hopefully* not touch until we can book something fun. Or, maybe put it towards the house...it's not much, but every penny counts. I've gotten good about putting something into my savings each month so that little bit more will make a difference.

    Thanks ladies.
  7. gcvmom

    gcvmom Here we go again!

    Seriously, though. IF I were getting a refund this year (and it looks like I'll actually have to pay what the state refunds us to the Fed, so at least it's a wash), I would use it to pay down higher interest debt, first (credit cards, car loan, that kind of stuff... mortgage I don't worry about so much since the interest is deductible). After that, I'd probably sock it away in an IRA. I'm the saver in the family.

    If you asked my husband, he'd go blow it on something fun and frivolous.

    Thank goodness we balance eachother out!
  8. hearts and roses

    hearts and roses Mind Reader

  9. DaisyFace

    DaisyFace Love me...Love me not


    Always pay debts first (I know, it's a bummer...but at those interest rates you're going to spend way more on the debt than you ever will on a vacation).

    Then when debt is gone...make sure you have an "Emergency Fund" of some kind.

    THEN it is vacation time...and because you won't have to worry about your bills you really will be able to relax.

    I realize that you probably know all this already...but it's not as much fun as booking a trip.

    My tax refund? You guessed it--paying off debt.

  10. trinityroyal

    trinityroyal Well-Known Member

    I agree with this advice in principle, with one exception.

    It's important to accumulate an emergency fund at the same time that you're paying off debt. Otherwise, if you run into an emergency, then you end up going straight back into debt.

    JoG, I would take the refund, and divide it into 4 parts.
    • 2 parts to debt service, on the debt with the highest interest rate
    • 1 part to emergency fund or long-term savings
    • 1 part to "planned spending", in other words, something that you're saving up for, like that well-deserved vacation.
  11. busywend

    busywend Well-Known Member Staff Member

    I like Trinity's idea. Mix it up a bit and that way you can get closer to the vacation, too. I think having some down time to experience something new or relaxing is very important in life.

    If you just save, save, save....when do you enjoy life?

    It is a balance for sure.

    Oh yeah, mine is paying for a wedding - well part of it!
  12. hearts and roses

    hearts and roses Mind Reader

    Okay - thanks for the sound advice. I think I knew all along that's what I was supposed to do!
  13. susiestar

    susiestar Roll With It

    You would do the most good financially by applying the $$ to credit cards with high interest. From what the credit counselor told us if you can pay down two cards or pay off one it is better to pay the one off. That way you eliminate the double fees because each lender will have some of the same fees that apply to every account in addition to the interest. Store cards usually have quite a few of these.

    I would urge you to keep some of the money for a planned splurge. By doing that indulgence it would help keep you from feeling deprived. If you get to feeling deprived it can lead to impulsive purchasing that could cost far more than your indulgence.

    Get a massage and a mani/pedi, or something else that makes you feel good. Probably let husband have some to do something similar. Even if it is done at a school it will make you feel good. Or plan a weekend staycation and use some of the $$ to get a new video game and movie or whatever.

    Just my thoughts.
  14. donna723

    donna723 Well-Known Member

    Mine was very tiny this year. I put half in my savings and took the other half to Walmart.
  15. KTMom91

    KTMom91 Well-Known Member

    We got a new water heater with part, and banked the rest, right next to Hubby's remaining severance pay. I know, so exciting, but necessary.
  16. crazymama30

    crazymama30 Active Member

    I got a mega return this year, I payed off several bills and splurged. 2 new laptops and other goodies. I am broke again now, but I used more for bills than I did for goodies. Also stocked up on groceries.

    For us? If I had less I would have done bills first. We were behind on several things and my wages were going to get garnished if I did not pay them off. It was an easy choice.

    I hope you are somehow able to be practical and frivolous at the same time.
  17. everywoman

    everywoman Active Member

    Well, difficult child wrecked his car---so I guess my refund will be going to repair his car---I'm not happy about it, but in an area with NO public transportation and a high crime rate, he has to have a car or he will make life miserable for everyone around him, and I don't want him to have another excuse to ask to move back home.
  18. TerryJ2

    TerryJ2 Well-Known Member

    I always pay down bills.
    Good luck!
  19. GoingNorth

    GoingNorth Crazy Cat Lady

    I don't get too much chance. I owe the IRS money from 2002. I am on a payment plan with them, but they take my refunds towards that.

    My husband died in '02 and I goofed up filing taxes for that year.
  20. hearts and roses

    hearts and roses Mind Reader

    GN, my H was in a payment plan with them for back taxes and about 2 years into the contract, we discovered that he was still being charged penalties and fees, which pretty much negated the payments he had been making - the balance never went down.

    Has this been your experience?

    PS: The reason I decided to file married filing separately was exactly due to the IRS taking my refunds. That happened once and then I stopped filing jointly with H. He is self employed and not good at handling his paperwork, yet would not allow me to handle the paperwork, so I file separate now. I'm usually done with all my tax prep by end of February. I don't think has filed in over 3 years!! Yikes!!