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What We Do With Our Tax Refund

February 10th, 2014 at 11:22 am

Getting a chunk of money back from the Feds and/or State? What to do with that money? Here is the strategy we use each year. I will use a refund of $5,000 to make the math easier.

10% - $500 to Charity
10% - $500 hers
10% - $500 his (which really means hers)
70% - $3,500 to savings (retirement, emergency fund, regular savings)

So 20% will probably be going for wicker furniture or upgrading a bathroom or new drapes or some other exhilarating project. Sadly it probably won't be going towards a shopping spree at Victoria Secrets.

If we had any outstanding debt I would use at least half of the 70% for debt repayment.

Don't forget to consider adjusting your withholding with your payroll department so you get more money each paycheck instead of a large refund. The only reason we get a tax refund is because of the EIC (earned income credit) we get because of all the yard-apes.

Now all I have to do is finish gathering all my 2013 tax docs so I can get my refund. Lame I know. I should have done that by now.

2 Responses to “What We Do With Our Tax Refund”

  1. creditcardfree Says:

    Great plan for the money! Can you get the EIC in advance? Would be nice since you are getting it every year. We have received it twice, but that was for years when my husband was deployed and his earnings were tax free. I made sure to put that extra towards college and retirement those years.

  2. OldAndInTheWay Says:

    Not sure, I'm guessing you can't get it ahead of time. If for some reason I were to get a huge raise/bonus (haha) then that could disqualify me for the EIC. So I am guessing you have to wait until the year is over and all the numbers are in.

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