I just finished filing our 2008 tax return using TurboTax Home & Business since I had to report a little freelance income for 2008. (If you’re not reporting freelance income, I suggest using TurboTax Deluxe.) The software costs about $40 on Amazon, but it makes it simple to do your taxes yourself. In my opinion, it’s worth the cost.
Since we got married in 2008, we’re getting a pretty hefty refund. It’s actually about $500 more than I anticipated.
We already decided that we’d be using the bulk of the money for savings. We’re putting 70 percent of our refund directly into our emergency fund. After that deposit, our emergency fund will be 55 percent complete!
It took us about 6 months to save that amount, so I’m hoping with our increased monthly savings amount we’ll be able to complete our emergency fund by the end of this summer (especially if we end up hanging on to some of our summer savings). Then we’ll start saving for our trip to Europe.
About 20% is going into our summer savings account to cover the fact that Tony isn’t paid to teach two months out of the summer. That fund is now complete. (Yay!)
My hope is that we’ll be able to hang on to a substantial chunk of that money and transfer it to our regular savings at the end of the summer. Our plan is to cut our spending as much as possible and try to live on my income alone for two months. However, it’s going to be a substantial pay cut (about 43% of our combined income), so I wanted to pay it safe and save enough to cover the difference. If we get into trouble, the money in our summer savings account will be there to bail us out without dipping into our emergency fund.
We’re using the remaining 10% of our refund to treat ourselves. Back in November, I booked a hotel in Washington DC for the last weekend in February at about $60 a night. The hotel is already paid for, but we decided to use a little of our tax refund to pay for a nice dinner and maybe some entertainment.
Originally we planned to spend no more than our monthly entertainment allowance on the trip ($50), plus the extra gas cost, which we’d pay next month when the credit card bill comes. Since our tax refund was a little more than I expected, we decided to use a little of the money for the trip. We still plan to spend as frugally as possible, though, and whatever we don’t use on the trip will go right back into savings.
Overall, our savings accounts have grown by about 50% as a result of our tax refund. Woo hoo!
If I had saved that money instead of loaning it to the government interest-free, I would have earned about $50 in interest. Sure, that’s extra money that I don’t have now. But when I consider the possible alternative (underpaying and owing a big chunk of money at tax time), it’s worth it to me to forego the interest income for peace of mind.
Whew. It feels good to be all done. :)