By now most of you who were getting a tax refund this year have probably already received it. So, the question has to be asked: what did you spend it on? Since the average federal tax refund is around $3,000 most people are getting a reasonable chunk of money. Sure, we can argue that it would be better to adjust your tax withholding so you don’t hand over so much money to the IRS with each paycheck, but the fact of the matter is many people are getting returns and they have to do something with that money. Of course, there are both good and bad ways to spend a tax refund.
So, did you put your tax refund to good use or was it some mad money that you used to stimulate the economy? We received a bit of an unexpected tax refund this year but I have to admit, we had no exciting plans for it. About a third of it went into savings, a third of it paid off the balance on a zero percent financing deal that was coming due on the lawn mower we bought last year, and another third went into our rental property. So, what did you spend yours on?
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About the Author: Jeremy Vohwinkle is a Chartered Retirement Planning Counselor® and spent a few years working as a financial planner. Today, he helps people make the most of their money by writing about personal finance here and elsewhere on the web. Jeremy is also Coach at Adaptu and a regular contributor for other publications such as Intuit, and American Express. Be sure to follow Jeremy on Twitter or Google+.
We received a $4000 refund. We spent as follows:
$2500 credit card
$500 savings bond
$500 new fence
$500 weekend vacation
~ half to student loan debt; ~ 1/8 to savings; rest to a few major one-time expenses that are needed.
We overwithhold as interest rates are so low right now. We received $11,000 back from federal and state. We converted all of our traditional/rollover IRA's into Roth's in 2010 so some may end up paying the additional tax hit we get in 2011 and 2012.
Still hadn't found the chunk for my wife's Roth contribution. We're still funding in big chunks at the end of the year, hoping that I will make too much to be eligible.
Our state refund went to pay for our summer childcare/camp. It meant that we avoided taking the money out of savings. (We got caught off guard by the fact that we had to pay for all of summer camp by April 26. I find this more than a little ridiculous.) Federal refund will probably mostly go to savings/IRAs.