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What to Do With Your Tax Refund

A whopping 59 percent of you said that you'd be happy if you got a fat tax refund, because it tricks you into saving more money than you would if the funds were left in your hands. And while I think your money would be better off earning interest in a high-yield savings account all year instead of the government earning interest on your money, there's no turning back the clock for your 2007 return. I'm sure you've been thinking of what do you with your tax refund, but to see my suggestions just

If you're carrying a balance on your credit card bill but you don't have an emergency fund that equals at least three months living expenses, save about a third of the refund and put the rest toward your debt. And if you're all set with your emergency fund or even if you're just off to a good start, but you've been struggling to crack away at your debt, this one's a no-brainer — put it toward your debt!

Being responsible with your money isn't exactly the most fun way to treat it right now, but it really does pay off later. Remember that the money you're getting used to be part of your paycheck and you worked hard for that cash. Try your best not to blow it on a big purchase that you normally wouldn't consider, especially if you're walking around with credit card debt or without an emergency fund for a rainy day.


Join The Conversation
bokc bokc 9 years
Great advice. But unfortunately I'm not getting a return this year.
katiejane24 katiejane24 9 years
I have to admit, I'm buying a plane ticket to visit friends in L.A. this summer...but the bulk of it I was thinking I'd split between a credit card payment and my savings account.
i-am-elle i-am-elle 9 years
Hmm... Mine will be going to my Discover bill & into my savings account! And maybe a little for me to spend. Just a little though! :-P
amers230 amers230 9 years
i'm buying a 20$ pair of shoes from target, using it to pay my april student loan payments, and the rest is going towards my credit card. i guess i actually need to get my taxes done before i talk about how i'm going to spend it though haha.
cvandoorn cvandoorn 9 years
I went shopping with it. :)
Knight-Who-Says-Ni Knight-Who-Says-Ni 9 years
I get $46 for my federal tax refund, which just barely covered my tax preparation costs! It's a little disappointing to not get a larger sum, but I suppose that means I'm doing it right - I'm withholding the proper amount of money, and the government doesn't get to earn interest off my dough. I actually owe the state of California, though. :shakes fist:
hex913 hex913 9 years
I just got my tax refund and I did just as you suggested: I used it to pay off one of my credit cards and put what was left into paying off half of another! Finally I see light at the end of my "debt-filled tunnel."
fashionhore fashionhore 9 years
I am putting 3/4 of it towards my car, and saving the rest. This way I won't have a car payment, and I will have some money saved for when I go back to school for my second B.S. degree!
Liss1 Liss1 9 years
I am paying bills and we are going to go on a cruise! We need a vacation and are trying to buy a home so this might be our last chance for a vaca for a while. I have been trying to put more into savings though.
phatE phatE 9 years
Dave Ramsey, Suzie Orman, slighlty different concepts, but overall on the same track.. I did not say personally that I had a 3,000 emergency fund, or that anyone else should..I said I wish I had a buffer instead of resorting to credit.. The one thing I do agree with Daisey on is, if you're getting so much back that you're paying off credit cards, or loans, etc you may want to check why..
mandy_frost mandy_frost 9 years
Mine from federal was $1500. I put $1200 toward debt (racked up some sizable cc debt last year when unemployed for a stretch which is getting close to the end), $100 to a new suit for work, and $200 straight to savings. I'm applying to law school, and with all those costs, I have to have more in savings than the $1000 emergency fund so I can still have that fund after applying. Also, ay, ay, ay! If I get invited to one more wedding, I'm going to have to raid the emergency fund. Can't my college friends wait until I make 100K a year to get married, or at least have a destination wedding in my current town? PLEASE?
mlen mlen 9 years
i put mine towards my credit card! its paying off my europe trip from last year lol (i may have shopped too much in london ;) )
rickimc rickimc 9 years
Paying off some student loans.
ElissaM ElissaM 9 years
I'm buying spring/summer clothes for my son and a couple YMCA summer camp sessions. Then paying the rest of my credit card that I didnt pay with my bonus at work and saving the rest.
ALSW ALSW 9 years
Spending it as we speak - on the mortgage. With hubby off work for surgery, we couldn't use the refund like we wanted, but instead used it as we needed to.
Daisie Daisie 9 years
I am going to go with the Dave Ramsey school of thought here and am going to disagree with Savvy. Check out his Baby Steps, they are great! I understand that one of you had $3K of unexpected expenses, but that's not how much a basic emergency fund is. Put $1000 into an emergency fund. Then use the rest to pay off debt. Once you have paid off your debt (google debt snowball - several theories, Ramsey's is paying off the smallest amount first and then moving on to each bigger amount, others say to work on the highest interest rate first) then you build your 3-6 month of expenses savings. That is in case of a layoff, larger expenses, etc. The best suggestion is to find out why you are getting so much back. Adjust what you're claiming so that the proper tax amount is taken out. Leaving YOUR money in the hands of the government for a year so that it can earn interest for the gov is a waste! Get your money back and invest it yourself so YOU can be earning that interest or better yet...not having to rely on a tax refund for anything!
Emiily Emiily 9 years
I might go to the dentist or put it towards getting a car. Probably the dentist. How much does it cost to get wisdom teeth removed? haha.
GlowingMoon GlowingMoon 9 years
We're debt-free, and already have a sizeable nest egg. I purchased a three-stone sapphire ring. :nerdgirl:
phatE phatE 9 years
princessjaslew.. you said "won't it make sense to put the whole thing towards your debt so you can reduce/eliminate paying more interest??" the point of an emergency fund is so you don't have to use credit if something comes up that you can't afford or don't expect.. i have always thought like you, but realized the importance of it recently when $3000 worth of unexpected incidences happened in the course of 2 weeks. Instead of being able to pull from a savings fun, I had to increase my line of credit and charge it.. It's important to pay off your debt, but it's even more important to avoid racking it up.
lickety-split lickety-split 9 years
lol, refund? i wish!
duck-duck-goose duck-duck-goose 9 years
The engine of our (very old & rather dysfunctional) car died today. Guess what we'll be purchasing with our tax return? (Another used vehicle, so we can pay cash -- in full -- no car payments for us!)
sfbutterfly24 sfbutterfly24 9 years
AAAGGHH mine has not come yet and I just want to throw 80% to my cc debt and the rest to my dentist. I am trying so hard to be good but the longer it takes from getting here the harder it is from me wanting to spend all on something wonderful but not good for me like a prada fairy bag!!!
SkinnyMarie SkinnyMarie 9 years
4 new tires. not priceless..
tee0206 tee0206 9 years
Unfortunately, my money will be going to the dentist... :(
aimeeb aimeeb 9 years
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