Recently, I asked the DGI Community: How Should I Spend My Tax Refund? I got some great ideas. Well, alas, my tax refund has come and gone. I’ve spent pretty much every dime and now it’s time to see exactly how I spent my tax refund. This won’t be a long post!
Here’s what I did:
Paid Off Credit Card Debt
Well, I had a small balance of about $1200 on my credit card. I would use the card to make up for overspending in the previous months. Credit cards are a dangerous thing if not used wisely. You tell yourself that you’re getting points and other rewards, but if you’re not careful, the debt just sneaks up on you. That’s especially true if the money that was supposed to go to the credit card was diverted due to some unexpected expense.
In any case, the card is once again out of my wallet as I transition to a cash budget.
Save For Down Payment
After much deliberation, I decided to save the remaining amount ($1500) towards the down payment on a house. I was debating whether to deposit this money in my dividend portfolio, but I ultimately decided against it.
The main reason why I chose not to fund my dividend portfolio is that the house is a goal that I hope to accomplish this year. On the other hand, the dividend portfolio is meant for my retirement. So, putting the tax refund towards the down payment helps me reach my short term goals faster.
There’s more to this reasoning that meets the eye. For starters, keep in mind that I plan on keeping the house long term as well. So, when I buy the house, it will also be for my retirement, unless something drastic happens that forces me to sell.
Additionally, and perhaps more importantly, after I buy the house, whatever money that was not used to purchase the property will likely be used to fund my dividend portfolio. So, if I saved $20000 to be used for a down payment and closing costs, but I ended up
In this scenario, I would ensure that I had funds (or access to funds) for repairs, vacancies, etc.
Conclusion
Well, there you have it. Not a long post.
I like getting a tax refund every year. I know it’s not necesarily the best to give the Government your money throughout the year at 0% interest. But, I’d rather get a tax refund (and a big one) than owing taxes. I also view a tax refund as a forced savings account for the year.
There are numerous things I could have done with my tax refund. I chose to both pay down debt and invest.
Have you done your taxes yet? Did you get a refund? If so, how did you decide to spend your refund? Do you think I made a good decision with how I spent my tax refund? Let me know your thoughts by commenting below.
Very nicely done. We do our taxes here in Australia a little different. We do ours at midway through the year (due in October). But I think I will get a small refund. Not sure what I will do with it.
Buy, Hold Long recently posted…4 Day Work Week
Better a small refund than owing any amount of taxes.
Goos choice DP. Paying down the debts is a good step in increasing interest and super low dividend yield enviroment in US.
Yea. I can’t wait to get rid of all the debt.
Try doing a graph of you debt change in year or two. If its a downward trend it should motivate you.
not a bad idea. I used a graph that helped me get out of consumer debt. I provide it as a free tool for joining the email list. Thanks for the suggestion.
Hope you will save enough money for the downpayment.
DSFI recently posted…Options Income | February 2019 | $126.94
Me too DSFI but currently that’s the plan.
I think paying off your debt was the smart move with your tax refund. As far as whether to invest the extra or put it to your down payment fund it’s all a balance. Given your situation and desire to purchase a house the down payment seems like the right place for that cash. Especially since as you said if you don’t need it when it comes time to purchase the house you can always invest the cash then. We’re working on finalizing our taxes and for now the plan is going to be keep it in cash until things get settled after the new baby comes to help with any other unexpected expenses that might pop up. If we don’t need to use it by the time I get back to work then it’s going straight to debt reduction.
JC recently posted…Budget Check & Cash Flow Update – February 2019
Hey JC. Saving your taxes sounds like a great idea until after the new baby comes. Congratulations by the way. That must be exciting.
I have been doing the same thing and saving up for a down payment on a house. Sucks I have less to put into my portfolio though. And my tax refund went toward paying tuition for this semester. Too many big purchases coming up here soon so just saving up helps.
Dividend Daze recently posted…Dividend Update – February 2019
Ya, it’s hard sometimes maintaining a robust contribution to the portfolio, especially when you have big expenses coming up. I have yearly expenses that I pay that are coming up in a month or two so I’m not sure what I’m going to do then.
Good decision in paying your debt first using the tax refund.
Kyra Rodriguez recently posted…How Employees Can Benefit from Tax Seminars in the Philippines
Thanks Kyra. I can’t wait until the debt is all gone!