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Tax returns and frugality

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It’s tax season. Your response to that phrase is either going to be “GASP” or “WOO HOO!”
So…Getting $50 back from Uncle Sam? $500? $5000?

This can be a dicey proposition for some of us: a little extra money can easily go toward something frivolous, or something you don’t need. That can be okay sometimes – but if you’re getting a large amount (or even a small one), sometimes you’re going to get a lot more value out of thinking long-term. And frugally.

Without further adieu, here are some ideas for how to spend your tax refund.

Whether small or big or huge, some wise thinking now can pay off big later. Here goes:

If you’re getting $50 back…
Don’t spend it all in one place.

Actually, $50 is a good amount to use to open up an account at your local credit union. Why? Credit Unions are great places to have membership – you’re not a number, you’re a “member,” and, with the focus on the “1%” and everyone in banking making zillions of dollars, note that all credit unions are not-for-profits. And insured as well. Learn more at this website: A Smarter Choice.

If you’re getting $250 back…
Is it time to start investing? $250 might be a good number to start an account with something like Sharebuilder – where trades are $4 each.

OR, if you already have mutual funds, see if you can invest some more – look for a “no-load” fund.

Funny enough, your insurance company might have mutual funds, too. (Frugal Freida just found out State Farm has mutual funds. Who knew???)

If you’re getting $500 back…
How about paying down a nasty credit card?

By nasty, we mean the one with the highest interest rate. BUT, some experts will recommend that, instead, you start paying down the one that is closest to zero. The mental effect of having a credit card with a zero balance can be a real plus for your psyche.

If you’re getting $1000 back…
Have you started your holiday shopping yet? Even if you’re not picking up stuff for Christmas now, think about those things like birthdays and anniversaries – and consider taking care of the ones you can take care of now.

OR, but things off-season…For instance, if you live somewhere cold and snowy, since it’s now April, see if you can find some discounted snowblowers or stock up on winter coats from the sale rack.

If you’re getting $5000 back…
Consider maxing out on your retirement plans – if you have an IRA, use that 5 grand windfall to add to it. Or, if you don’t have one, check with your tax professional and find out if it makes sense to open one.

Or, start a 529 plan for your kids – that’s a tax-free way to save for their college education.

Is this the definitive guide for what to do with your tax refund? No…

But we hope you can at least start thinking about how to spend that extra money.
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by on Feb. 15, 2013 at 9:15 PM
Replies (11-20):
by Silver Member on Feb. 16, 2013 at 1:04 PM
1 mom liked this

We use ours to pay the life insurance premium.

by on Feb. 16, 2013 at 1:32 PM
Im putting some aside for parties, summer fun and school supplies/uniforms. But I also have household repairs, new dryer, and bills to catch up on. Im also stocking pantry and freezer back up
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by Bronze Member on Feb. 16, 2013 at 2:03 PM

I haven't finished ours, but it looks like we're going to owe about $100. not bad for breaking even. I can TOTALLY handle that :) that's my goal! If we did happen to get a refund, it would go to bills. 

by Member on Feb. 16, 2013 at 2:06 PM

Our response isn't gasp or woohoo but more like - eh.  We don't get enough back for it to matter.  So we just do our taxes and then move on.  It's not something we give a lot of thought to.

by on Feb. 16, 2013 at 2:39 PM
We need car repairs and home repairs. Our house still has the original carpet from 1976 in some rooms..we got a good deal on this house though & it is in a good location..
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by Rhonda on Feb. 16, 2013 at 3:21 PM
2 moms liked this

We stocked up on a year's supply of beef & pork and the rest will go toward homeschooling books for the 2013-2014 school year.  If we had more, it would go into our savings

by Jen on Feb. 16, 2013 at 4:33 PM
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by Bronze Member on Feb. 17, 2013 at 5:16 AM

If I had to do it over again I would get a roth IRA, that's what I'm advising my kids to do.

by on Feb. 17, 2013 at 3:37 PM

Sadly, whatever we get back is going to fix our car, which just decided to have a hundred things wrong. Anything leftover (PLEASE let ther be something leftover!) will go towards credit card debt.

by Member on Feb. 18, 2013 at 12:50 PM

I'm splitting mine (hoping this is my last year for a large refund - I tweaked the exemptions).  Saving $500 towards new tires, put some towards fully funding my emergency savings, and saving $500 towards a trip.  The $150 or so that's left is going to debt repayment.

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