2018 Tax Refunds
Tax season. Exciting times. While ensuring that the government gets their forms and money on time, this time of year can create a lot of stress on the household. We are usually fairly excited to complete our taxes. Not only is it a big item checked off the to do list, but the anticipation of the refund is also exciting. Hopefully you’ve checked this off the list already since the deadline is past.
I feel like tax time is always a learning opportunity. We learn something new every year, not just about our own tax situation, but about our spending and savings habits as well. Every year since getting on a budget, we’ve tried to be extra intentional with the cash that comes back into our budget through a tax refund. 2018 taxes were no different, except I forgot about some of the most critical pieces of information when filing our taxes that we got to learn something new this year as well… how to amend a tax return.
We thought it would be easier to use the TurboTax iPad app to complete our tax return instead of the online web version. Big mistake. While it had our previous information when we logged in, the flow of information is very different. And I think partial blame for the amendment to our return goes to my trust in TurboTax. The web version is always great at asking and clarifying things that you’ve had in the past to see if they also apply for the current year. And there was none of that on the iPad app. We went through all the documents we had received or retrieved, but forgot a few key components to our situation: HSA contributions/expenses, College tuition payments, and dependent care expenses. Turns out those added up to about $1,400 state/federal refundable dollars that we left off… ugh….
So despite initially filing our taxes in early February, we had to wait until a few weeks ago to amend them and now get to wait an additional 12 weeks for the amended refund.
All that aside, with our refund, we are planning on saving the dollars for another car purchase. My turn for a new-to-us vehicle this year. After replacing Kelsey’s van last year, I’ve been driving her old minivan ever since. Which was a major upgrade from the car I drove, but far from what I want to be driving at this point in my life. #dadlife
So, we’re saving our tax refund to pay cash for a replacement vehicle later this year.
What to do with your tax refund?
Be intentional. That’s the key. Make a plan and then execute the plan. If you’re married, talk about it and come to an agreement. The average tax refund is $2,899 and there is a lot you can do with that amount of money. Here’s a few ideas for what to do with your 2018 tax refund.
Emergency Fund - If you toe the $0 line in bank every month, and don’t have any savings, take this opportunity to boost your emergency fund. Having funds set aside for a rainy day will help bring peace to your financial situation. Then when something does come up that’s unexpected, you’ll have a fund to pull from instead of putting it on credit.
Vacation - If you’re committed to taking a vacation this summer, but haven’t entirely thought through how you’re going to pay for it, consider savings part or all of your tax refund to check that savings item off your list. That should help free up your monthly budget for other goals, and you can know that your vacation is already taken care of.
Pay down debt- Make a dent in an old credit card, wipe out a student loan, or reduce a car loan. If you’re in debt snowball mode, you likely already know what to do. Hopefully it will make an impact on your debt freedom date!
Save for major purchases - car, furniture, Christmas: those things happen, plan for them by saving monthly, or take care of a few things with your refund.
Invest - how about putting the refund to work for you. If you are able, fund a Roth IRA, or open an investment account and put the money to work for you. Of course, you might want to attack some of the other items above first.
Invest in yourself - Maybe there are some courses or certifications you’ve wanted to take, but didn’t have the cash to pay for them. Let your refund help get you started.
Nothing too fancy on this list because personal finances don’t have to be fancy. Most of the time keeping it boring is the way to long-term success.