Saw this comment come through and it reminded me to get my a$$ in gear and finally wrap up my own taxes ;) How are you doing with yours? Getting any refunds back?
Here’s an idea of what you could do with it if you are:
Thanks to earned income I get a tax refund of anywhere from $4k to $7k per year.
I use that tax return to pay all my bills for a year. I multiply my cell, internet, Netflix, and car insurance by 13 months (I like an extra months padding), then take that amount and add the cost of my contacts and vision exam, dental costs, and life insurance. I then deposit that amount into a Capital One 360 account.
Every month I sit down and pay my bills directly from that account.
BOOM! How’s that for a refund strategy?! Using it to pay your NEXT YEAR’S EXPENSES in full! Minus your mortgages or loans or important stuff like food, of course, but still – pretty clever :)
I tend to go the more boring route and just funnel any extra refunds into maxing out my IRA for the year so it feels like I’m getting it for free (hah!), but whenever I break even that’s perfectly fine too.
Just so long as I never OWE MONEY at the end of the year!!
I’ll do anything to avoid that pain, even if it’s just psychological, haha… And I bet that’s why others prefer getting money back at the end of the year vs having to pony up some as well… Getting money that feels *free* is always much more exciting to spend or save when you get it in a chunk like that! So if it helps you propel your goals by “giving the gov’t a loan”, so be it! There are worse ways to get that scratch!
That’s how I look at refunds, anyways… How about you? Have any mantras or strategies of your own with tax management? Do you use refunds to take nice vacations or pick up fancy toys you wait all year to finally get? :)
I’ll be honest and say I’m always a bit envious of those who can spend their refunds freely like that without any guilt… I like to think that everyone doing this has already rocked their finances all year so this is their one reward for doing so, but I’m not naive enough to think that’s actually the reality ;)
But if this IS you, I salute you with both hands and feet!! That’s a great balance to achieve and I need to be better about it myself!
Jay loves talking about money, collecting coins, blasting hip-hop, and hanging out with his three beautiful boys. You can check out all of his online projects at jmoney.biz. Thanks for reading the blog!