What Will You Spend Your Tax Refund On?
For the first few years that I started earning and paying taxes, I never bothered to file my returns and get back some of my hard earned money. I was always too lazy to do the paperwork.
Now, though, I have hired an accountant who files my returns and every year I get a neat sum through a much awaited check. I have been spending my tax returns on things that I usually need at the time. I remember spending my first check of $2,600 on retiling the garage and fixing the boilers. The next check went into the lease of my new car and so on.
I recently met someone who not only plans to get a tax refund, but also plans what to do with it. This lady has a small savings account in which she deposits every tax refund check she gets. I asked her what she was saving for. “Why my son’s college of course!” she exclaimed.
It was then that I realized that there are thousands of things you can plan with your tax returns. She chooses to save her’s for securing her son’s future. I could choose to save mine for something else. Or better, I could just spend it now and get myself something fun!
This thought got me so excited, that I actually started asking around to understand what people spend their tax refunds on. One friend of mine had actually used $6,000 of tax refund money on getting his own pool. Of course, he had to put in some of his money too, but then he actually did something fun with it.
My brother in law chose to start an emergency fund with his refund. He is a cautious man and I wouldn’t blame him. In fact I thought the idea of starting such a fund was great because everyone needs an emergency fund. (Read here to find out Why an Emergency Fund Is Important.)
I feel making home improvements is a great idea for putting your tax refund to good use. I had been doing so myself so far, but I never planned it that way. I spoke to my accountant also, and he told me to invest the money into a tax sheltered account. The individual 401K plan sounds great and I am seriously considering putting my money into it.
What I gathered from talking to so many people was that different individuals view their tax refund money differently. Some feel that this is bonus money you get, so it should be spent on something fun – something you wouldn’t spend your regular income on – and I completely agree with their point of view.
Then there are those who use their tax refunds to invest in something useful or start a rainy day fund of their own. This is not a bad idea either. Since I think both are such great ideas, I am a little torn about what I would do with mine. I feel that I would use a part of it for something fun and a part of it for a smart investment. So I get a little of both.
What do you think your tax refund would be spent on?
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