What I’m Doing with my Tax Return

We’re goin’ to Disneyland!  Just kidding. :)

Well, first off — I don’t think you should hope to get a giant tax return.  That’s just giving uncle Sam a giant loan and that’s not good.  BUT, last year we spent a HUGE amount of deductible stuff, so we’re getting a lot back.  It probably won’t work that way next year, but time will tell. :)  But, if you’re getting a whole lot back you might want to re-think how you’re getting taxes taken out of your check.  It’s not smart to get a giant refund.  I, personally, hope to keep it just under 1k back.  I don’t want to pay, that’s for sure. :)

But, 1k is still a nice chunk of change. :)

Secondly, I do use taxact — the online version.  I was a Turbo-Tax diehard until they started raising their prices.  I decided to try Tax Act after an account’s wife said that’s what they use.  I like it, I am not sure it’s quite as thorough as Turbo Tax, but I’ve been doing my own taxes for as long as I’ve been paying taxes so I’m pretty aware of what’s out there, and what I should be doing.

Anyway, so what am I doing with it?

We have 5 bank accounts at our bank.  I was mulling over getting a great savings account like an IMG or something like that, with great interest — before the whole layoff, when we had quite a bit in savings.  That’s no more {nervous laugh}.  I probably will open one of those accounts one day… {dreamy sigh}

1.  Checking — I put our budgeted amount in this account each month.  It’s what we pay for things during the month.  It also keeps me honest knowing that JUST our budget amount is in here.

2.  Savings — This is where our paychecks go.  Because my paycheck is totally random I use this account as a buffer against months I’m not earning enough.  It holds just over 1,000 in savings as a buffer against unexpected small car repairs and me not working enough, etc.  This was the brainchild of my friend Lara when I just couldn’t figure out how to not ruin our savings when stuff like that came up.  I love Lara. :)  BTW, I wish more people were more transparent with what they did with their money.  I’ve learned a lot from friends who are honest with how they deal with theirs.

3.  Money Market — this is our longer term emergency savings.  Its the one that pulled us through the move and is significantly smaller now.  My goal is to have 3 months of living expenses in this account.  We don’t right now, so it’s in building mode.  This is a total emergency account.  End of story.  My goal is to never touch it.

4.  Family Fun — I think it’s really important for us to have things for our family when we’re earning good money.  I found it hard to figure out a balance between being Mr. Scrooge with my money and showing my kids that when I work a lot, they get some benefit.

5.  Home Improvement fund — it’s just smart money to put a bit into your house along the way, fix little things.  And this fund helps with it.  It will be buying us a new toilet soon. :)

Anyway, so I’m dealing with my tax return the same way that I deal with “extra” income.

  • First off, the income fills up our savings to my designated dollar amount.
  • I am then going to set aside a small amount for the kids college funds and possibly my HSA.  Not sure of this amount, it kind of depends on my mood.  Neither of these are going to get very much this year, because we’re still building that Money Market account, which I personally think is more important then saving for my kids college experience (especially since we’re currently also trying to pay for Drew’s college experience from the Money Market account).
  • After that I call it (mentally) a spillover.
  • Half of it goes into our money market, and the other half is split between family fun and home improvement.

At first I felt kind weird about this.  I mean, shouldn’t I bet putting ALL of into Money market, to build, build, build?  And yes — you do want a lot to go in to that.  After that account reaches my 3 month of savings mark I will probably diversify a little bit putting more into our retirement, the kids savings and my HSA but until then half is what I’ve found to work.

The family fun and the home improvement accounts stop us from grabbing into money market.  We rarely take out of there, and that’s how it should be. 

I would like to know what people do for BIG stuff they’re saving for.  I mean, we don’t have a new car on our horizon, that I know of {furiously knocking on wood} but I figure we might want to start saving for one now — but for right now that is our money market account… thoughts?

We use the family fun fund for vacations.  I’ll give us an extra hundred or so over spring break to have a few splurges with.  My kids know it’s there and they get to help us decide how to use it.

Anyway, that’s how I’m going to use our tax return.

How do you use yours?  I’d love to know!  I’m sure there’s flaws in my little system.  I read an article today about how someone was using theirs.  Most of it was going to debt, which I’d totally agree with.  She also said to use 5% as a splurge, which I sort of agree with.  I think that’s kind of our family fun fund and because we’re building that money market I figure we’ve splurged enough with the year.

Anyway, “extra” money is an interesting thing.  How do you allocate yours?

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Comments

  1. says

    We are huge Dave Ramsey fans (like, huge. I have his podcast app on my phone and I listen to it in my spare time like a nerd) and his system has been great for us for the past couple of years. So yeah, that’s pretty much how we do money, of course with our own little variations here and there where need be.

  2. says

    Just like you have a home improvement fund we also have a car fund. It’s not a separate bank account but we put a set amount each month into a category on my budgeting sheet that is only for car. This is where we take car repairs from when they happen and the rest is just building up for potential new cars. We were able to buy our van mostly with just cash by having this allocation. (We borrowed the difference from Money Market which is a lot easier to pay off then an actual loan).