What’s the Best Way to Spend Your Tax Return?

This is a guest post from Jason Larkins. He writes at WorkSaveLive – a blog dedicated to helping people change the way they think about finances, careers, and their lives.

For some, tax season means stress and anxiety brought on by the fear of the unknown.

‘Are we going to owe? How much? How are we going to pay it back?!’

For others however, tax season brings some excitement as we await the pending return of the money we loaned the government over the past year!

I’ve never owed taxes and I seem to receive a fairly sizable return each year (despite adjusting my declarations), so I celebrate filing my taxes like it’s the 2nd-coming of Christmas!

I almost treat it like it’s a game:

January comes…impatiently wait for all of the forms to arrive…enter them in within an hour or two…CHA-CHING!

I win! Please pass Go and collect $200 (or $3,500 – which is what we’re getting back this year)!

If You Get a Refund, Where Should You Spend the Money?

For the majority of people that have yet to get their financial lives in order, tax refunds are simply a way to catch up for last year’s mistakes.

If you live paycheck-to-paycheck, don’t budget, and haven’t saved any money, then odds are you’ve already spent your return before you ever knew what it was.

There are the Christmas gifts that were put on the credit card, personal property tax bills, and sometimes I’ve seen clients that are so far behind on bills that they were relying on their tax return to get them current.

What I’ve seen through coaching, and what I experienced before getting my financial life in order, is that most Americans rely on tax returns just to cover their normal way of living.

The majority of us don’t live on less than we make (meaning we go into debt sometime throughout the year), so the tax return is spent on catching up on all of the over-spending we did last year!

Instead of that being your reality, think for a second what it would be like to be able to make TRUE progress with your tax return.

What FUN things would you be able to do??

How We’re Spending Our Tax Return

We’ve been working our way through debt for nearly 4 years now (ugh).

We’ve paid off $55,000 of our original $110,000 of bondage over that period of time. We’ve changed our lifestyle and income to where we’re ALWAYS living on less than we make, never going into debt, and making consistent progress each and every month (because we have true disposable income).

So for us, the tax return represents EXTRA money. It’s nothing that we rely on to cover past mistakes and we certainly don’t plan on it, so we’re able to do whatever we want with it!

Taking a minute to reflect, I’d venture to say that’s why I view filing taxes as a fun game. I’m just anxious to see how much money I get back so I can see how much fun we’re allowed to have!

So, what are we doing with it this year?

1. Buying Season Tickets for The University of Kansas Football Games! ROCK CHALK JAYHAWK!

I was actually challenged by a MIZZOU fan on this one. They asked, ‘do you really view buying tickets to the lowly Jayhawks’ football game as a fun thing to do?’

Well, I’ll concede that we’ve been terrible lately, but I’m excited about Charlie Weis and the team that he’s put together. We’ll see how things go, but regardless, I’m stoked to be able to go!

Buying these tickets was something we wanted to do last year (which I’m thankful we didn’t), but it just didn’t fit into the budget at that time.

2. A New Bed for My Dog

While pet supplies is something that’s a part of our monthly budget, we haven’t been able to save up enough to buy my “puppy” a new bed.

For most people this wouldn’t be a large expense, but my “puppy” is a 160 pound Bullmastiff.

To buy him a bed that will work for his human-sized body will set us back somewhere in the area of $150-200.

I’ve been putting this off for awhile as it isn’t a “need,” but since we have the extra FUN MONEY it’s time to go ahead and let him sleep in style.

3. Giving to Others in Need

I realize that there are others out there that struggle with finances, and I know that there are people throughout this world that only dream of the things we take for granted.

We give on a monthly basis, but any time we receive gifts or “extra” money, then we also make it a point to help those that are less fortunate.

4. Saving Up for a New Car (new to us)

Despite being in debt, our current financial goal is to save up enough money to pay cash for a car. Our cars are getting older and I believe it’s wise that we’re prepared to buy a new car in the event one of ours decides to call it quits.

Currently we have about $4,000 saved for this and our goal is to get to $8,000 before we move onto our next area of focus.

The remainder of our refund will be set aside and this will almost help us to accomplish our $8,000 goal!

When you have your financial life in order, getting a tax refund can be an extremely fun time. It doesn’t have to be a time filled with fear and anxiety…

What are you spending your tax return on this year?

21 Responses to What’s the Best Way to Spend Your Tax Return?

  1. Emily Hunter says:

    I actually thought that said ‘buy a new beer for my dog’ and I was trying to figure out why the dog was drinking Red Dog. :) I’m going to be spending my tax return on paying bills, if I get one in the first place. This has been the first ‘real’ year of going freelance, and taxes are wonky.

  2. Michelle says:

    We spent it on a “new to us” car. Worth it!

  3. Money Infant says:

    I’m not, it is going into savings where it should have been in the first place rather than giving a year long interest free loan to my dear Uncle Sam.

  4. WorkSaveLive says:

    @Michelle – I love the “new to us” cars! I’m glad we’d been saving up for it; it looks like we’re going to have to buy one in the next few weeks!

    @Emily – LOL. I must admit that I did allow him to have a beer when he turned 21. He LOVES it. It’s kind of ridiculous. He starts drooling any time he sees a glass bottle now.

  5. I always immediately put a little into savings and the bulk into debt servicing. It’s what I would do all year anyway, so why not?!

  6. Refund? What’s a refund? Thanks to some extra money I made freelance writing, I owe money to the feds again this year. If I was getting a refund I’d probably put it into new to us furniture for our new condo.

  7. WorkSaveLive says:

    I’m generally with MoneyInfant and Sandy on this one!

    Most years we put it into savings or knock out a debt, but we modified our goals a bit this year. :) Have to have a little balance!

  8. Marianne says:

    I generally ‘borrow’ extra money from myself to max out my RRSP and then use the refund to pay myself back.

  9. I’m putting almost all of it right in my emergency fund (which will be fully funded for the first time ever)! I’m going to keep a few hundred and go shopping with it – I haven’t bought new clothes in a really long time. Specifically, I’m going to go look for nice (inexpensive) workout clothes since I’ve been going to the gym consistently for the last few months.

  10. I don’t expect to get a refund. I never want to give uncle sam an interest free loan so I’m ok with it.

  11. WorkSaveLive says:

    @YPF – I love the idea of spending a little on yourself. I think it’s nice to have a little reward for sacrifice and hard work!

    @BEMB – I wish I could figure out how to break even exactly (owe no taxes or get any back). That’s awesom you can do that! We’ve had so many changes in our life that it’s been impossible to really determine what our declarations on our W-4s need to be. Last year was new jobs…this year I get changed to a 1099 employee on 100% commission. :) Should be interesting next year for us.

  12. I just wrote a similar article to this, I would def say to spend some money on yourself, it is good to be smart with it but every once in a while it is nice to spoil yourself

  13. Nice post Jason.

    I actually enjoy preparing my taxes, is that wierd? I paid my car off and put the rest in savings.

  14. Christa says:

    Paying off our only remaining credit card!!! We’re super-excited (if you couldn’t tell).

  15. I owe this year, and now we’re struggling to come up with the cash by the deadline. My brother bought himself a tablet with his return this year.

    For my parent’s there has usually been a big capital expense that comes up just before tax time. They’ve had to buy two separate washing machines with tax returns over the years.

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  18. It went to into savings!!! :)

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