My undergrad was in Accounting, so I’ve been schooled on taxes. I even worked for a CPA firm a little after graduation during tax season (which by the way is what made me never want to be a tax accountant). One of the most important things that came out of my undergrad tax classes was the school of thought that a persons goal should be to get no refund. It’s the idea of not letting the government have an interest free loan from an individual and letting that individual use their money real time. It’s tax avoidance at it’s finest.
So why would a Mommie, or any household manager care about this? Because a large number of people get money back every year. It’s what you do with the money that counts!
We received our tax refund fairly quickly this year and we did get a chunk back. I always feel terrible when that happens because it mean we were lending the government money, interest free, for the whole year when we could use it in our family. So what did Mommie and Mr. Mommie spend the refund on?
1) Pay down credit cards – Even though a trip to Florida would have been nice, we paid off one credit card that has a somewhat higher rate and cut our other credit card balance in half. While this may not seem glorious, there are substantial benefits to doing this!
a) By paying off a card, we have 1 less monthly payment to make. This increases our disposable income from the month we pay it off forward.
b) By cutting the balance of another card in half, we’ve also cut our monthly payment in half (if we were to pay just the minimum). Again, this increases our monthly disposable income.
2) Paid some one time expenses – These included karate gear for our kindergartener (hopefully this fad lasts longer than the dance lessons we paid hundreds for and she went to only once)
3) Pad our Christmas Club account – We put some into here so we don’t get killed next Christmas. Also, this account earns a higher interest rate than our normal savings, so it’s a double bonus!
4) Luxuries – Sorry to say, but yes, we have some luxuries we bought. They consist 100% of eating out. Since I quit working to be Mommie, I cook about 95% of the time. So we took some of the money and ate out a few times. It’s always nice to not have to do dishes or clean up the kitchen.
My only line of advice on this is pay off debt first. If I was single, I probably would have just put it all toward debt and left that at that, but I’m not. Therefore we opted to use the money in other ways than to use it all for debt. But I support this on all fronts, as there is something to be said for the other little things in life.
Let me know what you’re doing with your refund! Let me live through you:-)
