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After getting the last 1099, finding an important document, and finally getting just a bit of time to review it, we're finished with our taxes.

I'm so relieved to get that done and now I can get caught up with some other financial paperwork.

Tackling Two Major Goals with the Our Tax Refund

It looks like we're getting a modest refund (thank baby girl!) and like we've done before, we have a plan for the money.

Last year it went towards the paying down the mortgage. The year before that, we also sent the money to our mortgage company.

I'm happy we did as we've not only shorten the mortgage, but we've also cut down on interest payments.

This year, though, we're doing something different. When we sat down in December to come up with family goals for 2012:

Whenever we receive the refund, we're going to divide the federal money as 70% towards the car replacement fund and 30% for paying down the student loan.

We haven't decide what we'll do with the state refund (didn't expect that), but I'm hoping to use that little bit of cash for the student loan.

We already have a small start with the student loan project so the refund can be a big boost and help us reach our 2012 goals. 

We're hoping to get the loan paid off sooner so we can lower our monthly expenses a bit more in the long run.

How Others are Using Their Refunds

tax refund plans

Last year, Betterment ran a survey to see how people planned on spending their tax refunds.

The choices were:

  • Spend it
  • Save for a big purchase (new car, new home, etc)
  • Invest in stocks & bonds
  • Save with no specific purchase in mind
  • Save for retirement
  • Pay off debt

The majority of them decided that paying down their debts is a priority.

I agree that getting rid of debt can be a great financial move. It can also be empowering as you have pressures on your monthly cash flow.

Thoughts on Tax Refunds

I'd love to hear from you about your plans. H0w many of you have received or are expecting a refund this year? What are your plans for it?

About Elle Martinez

Elle Martinez helps families at Couple Money achieve financial freedom by sharing tips for reducing debt, increase income, and building net worth. Learn how to live on one income and have fun with the second..

15 comments add your comment

    • Great plan – getting rid of student loans is like weight being lifted from your shoulders. I can’t wait until we get this last one paid off!

  1. My recommendation is to take steps to make the refund smaller :) I know that people like to use the IRS as a bank, but you’re really making the government an interest-free loan. Rather than doing it all at one time, why not do it during the year?

    Your goal at tax time should be to have a refund of less than $500. If you are a family of four, with two children who qualify for the child tax credit, earning $60,000 combined, the higher-paying job should claim 3 or 4 withholding allowances and the lower-paying job one or two. You can figure out the difference between what you are actually having withheld now and what you will have withheld, and deposit that in your fund each paycheck rather than depositing it all at once.

    • We’ve adjusted our withholding, but it seems like the last few years have been eventful, which means we claim deductions and credits that put us over a bit. With my self-employed income, I try to err on the side of safe and we tend to get a refund (varies on size year to year). We got less this year as income has become steadier.

  2. Normally we would put it towards the mortgage but this year it is going towards our honeymoon! Woot!

  3. our baby was born in February. my husband took 6 weeks off work (unpaid) and I took 5 weeks unpaid in addition to my 6 wks paid time off. Our tax refund is going to pay bills and pay down the debt occurred while pregnant (hospital, doctor, ect)

    • MMAuck – Congrats to your family for the new member:D Great idea on using that money to help you out while you bond with your baby!

  4. I’m going to divide it between my savings goals in my ImpulseSave account: some for paying off my student loan and some for buying a new computer. It’s not much, but any bit helps!

  5. I wrote a post about this last week. A good portion of ours is going to savings though we are setting aside some to do some sort of a trip for our five year wedding anniversary this fall. We also have a few things around the house that need to get one (dead tree removal) that will be coming right out of this too.

    • You have great ideas MB – we too have a few house projects I’d like to get done at some point.We just celebrated 5 years in December -hope you two have a great anniversary later this year:)

  6. In the past few years I’ve tried to stay away from getting a very big tax refund. Lots of things changed last year and I’m unfortunately going to have to pay in this year. However, if I were going to get a refund, I would definitely put it toward an emergency fund.

  7. I did a much better job of calculating my tax liability throughout the year this year – I got about $2,500 back the last couple of years, but I’ll only get around $700 back this year. When I get the refund, it’ll go towards my condo down payment fund. I’m trying to beef that up as best as I can before I start hunting for a condo to buy again (my previous attempt didn’t close).

    Maybe next year my tax refund will only be around $200 :)