We haven't received our tax refund yet, but I've already budgeted what we're going to do with it.
Before any readers get up in arms, know this:
- I have a ballpark idea of what our refund will be
- I usually estimate conservatively, meaning that we usually get at least what I estimate
- Most of it is going into savings
Using a couple of online estimators, I was able to forecast roughly what our tax refund will be from the feds. I have a separate fund within our money market account (one of the many types of savings accounts we consider) where I allocate a portion of any blogging income aside to offset the increased income which does not get taxed throughout the year. Add this to our state refund and this comprises the entire amount we'll get back.
Without knowing the amounts, I can already tell you where it will likely go. Things might change a little bit here and there, but overall, here's the percentage allocation we're likely looking at:
- Savings replenishment – 25% – When we bought our camper last year, we went a tad bit over budget. We have a comfortable savings and we went ‘over budget' with the understanding that we'd essentially pay ourselves back with the refund and a percentage of other income
- New car fund – 20% – Eventually we'll need to replace our cars, currently 5 and 6 years old and ideally we would not take on a new car payment when that happens.
- Home repair – 20% – We have a really big oak tree in our backyard that is dying and needs to be removed this year as it is annoying (it drops what leaves it grows around the 4th of July) and is close to the corner of the house so it presents a future danger. It's very tall and will have to come down in pieces so it's probably going to be pretty costly. We're also continuing to save for a new roof in the next couple of years.
- Kids fund – 15% – Little Boy Beagle will be starting pre-school in the fall, so we would like to have that paid for up front.
- Travel fund – 10% – This fall will be our 5-year wedding anniversary, so we'd like to do something fun for that, as well as pay for the camping trips we plan on taking throughout the summer in our new camper.
- Auto / Camper repair – 5% – Fix any routine or unexpected costs arising from the cars or camper
- Gift funds – 5% – To pay for Christmas gifts and other gifts that we purchase throughout the year.
All that adds up to 100%.
If the refund comes in significantly higher than we estimated, we'll often give ourselves $50-100 each in extra spending money but if we don't get that, it's not that great a deal.
In other words, most of it goes directly into savings with allocations to specific earmarks. The travel fund is the only thing that my wife would consider ‘not boring' *lol*
What are you planning on doing with your tax refund this year?
Image: Calculator and tax return by Images_of_Money, on Flickr