How Would You Spend $6,500?

uncle samAs many of you know, 2013 was my first year of self-employment.  And for the most part, it’s been awesome.  I made plenty of money, did all kinds of fun jobs, and had my writing featured in places like Lifehacker and Fox News.  It’s been epic.  But, despite all of my successes, I managed to roll out one epic fail.  It’s confession time, folks, and I share this shameful admission with a heavy heart.

So here it is…..*cue tears*

I overpaid my taxes and gave the government an interest free loan.

Now, simmer down.  I know you’re angry and upset, and I totally get it.  If you need to leave and come back later, it’s cool.  In fact, I appreciate the extra traffic.  Have a latte or something.  Seriously.

How I Overpaid My Taxes

Let’s first start off with the reason I let this happen in the first place.  The only explanation I can come up with is that I have no idea what I’m doing.  I knew that I would have to pay a ton of taxes so I just sent in a third of everything I earned.  Further complicating matters was the fact that I owed money several years ago and absolutely hated it.  I mean, it made me want to set H&R Block on fire as I left the building in tears.  Ever since then, I have tried not to owe money at tax time.  Sue me.

The good news is that we’ve changed our strategy for this year and will no longer be sending in so much cash.  In a way, 2013 was just my practice year.  It’s all good.  Live and learn, am I right?

How Would You Spend $6,500

Still, the damage is already done, and I’m due to get a tax refund of a little over $6,500 in the next few weeks.  In a way, I’m slightly angry with myself.  On the other hand, I’m like, “Sweet, I’m getting $6,500 back.”  Lame, I know.  Anyway, I do need to come up with a plan.  We decided last year that we didn’t want to let our emergency fund swell like we have in the past, so I need to find a place to make this money work for me.

How Would You Spend $6,500?

Whether it came in the form of a tax refund, as part of a structured settlement, or as an inheritance, we would all have to do something with $6,500 bucks, right?  How would you spend $6,500 if it landed in your lap?  Here are the ideas I’ve come up with:

  • Vacation Fund- I typically just finance our vacations as I plan them, but I’ve always wanted a dedicated vacation fund.  $6,500 is a little more than we would need since I finance most of our trips with credit card rewards, but we could use part of it.
  • Retirement- I’m so boring.  It would be so easy just to plop this money in a Vanguard account and pretend the whole thing never happened.
  • Taxes- This probably sounds crazy, but I’ve considered using the tax refund to pay more taxes!  What a novel idea, right?  $6,500 would be enough to pay my first installment of quarterly taxes that’s due on April 15th, plus some of the next quarterly payment (It depends on how much I earn).
  • Our Second Website- Our second website is up and running and I desperately need to get more content up on it.  With that being said, it might be time to make a financial investment in some additional writing.
  • Gambling in Las Vegas- You know what would be better than $6,500?  $13,000 of course!  I told you that I’m heading to Vegas in mid-May for a weekend trip with friends.  I’m thinking roulette, no?  (I kid, I kid)

So, how would you spend $6,500?  What would you do if you were me? 

About Holly

Holly Johnson is a wife, mother of two, and frugal lifestyle enthusiast. She is the co-founder of Club Thrifty and a staff writer at Get Rich Slowly, Frugal Travel Guy, and U.S. News and World Report's "My Money Blog." Holly has been featured in the Wall Street Journal, Kiplinger Personal Finance, Fox Business, and Daily Finance.


  1. I would be tempted to throw the money, or some of it anyway to website number 2. You’ve already paid your taxes so you could use that ‘extra’ money to invest in your growing business. You could even split it and pay the feds half of and use the other half for website promotion.
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  2. You guys seem to be cash-flowing vacation expenses just fine, so I’d just invest it. Whether that’s in a retirement fund or in your second website would depend on where you think the higher ROI would be. =)

    And don’t beat yourself over the interest free loan to the govt. It’s better than having to pay them interest!
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  3. My husband’s income is irregular and I never mind getting a refund back. We seem to adjust his withholding every year and still get $5,000 – $7,000 back. I’m with you, I’d much rather get a refund than OWE! We usually save some and do a house project with the rest. Boring, I know.
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  4. I’d just put the whole amount into my trading account. It would let me secure a larger weekly trade and thus more weekly income.

    Yes, I trade every week for gains. Call me crazy if you like.
    hungry hungry artist (@blerghhh) recently posted..The freelance lifeMy Profile

  5. I think that you could allocate a percentage to all of the line items you mentioned.
    Michelle recently posted..The Blog Post I Would Love To WriteMy Profile

  6. Vacation fund! That’s always the first item dropped from our budget.
    Tre recently posted..Deducting Your Hobby ExpensesMy Profile

  7. Over paying sucks, but just think of what you have learned from the experience and how it will add to your future guru status. :-)

    I would likely put it towards my current rehab project or a future one. With the options you’ve listed I would say investing in the new website or investing it in retirement accounts. Actually, just do both. No need to choose.
    The Stoic recently posted..Spring ComethMy Profile

  8. If I were you, I would rather choose to use it for your second website. It’s a good investment and you’re already on a right track now! But the vacation fund is a good choice too. ;)
    Marie Zalbe recently posted..Screw You Chase Bank ATMs! Why Do You Never Work?My Profile

  9. I would put it all towards my debt. If I were you, I’d split it between vacation fund and retirement or savings for paying taxes.
    Kasey @ Debt Perception recently posted..Month 15 Progress UpdateMy Profile

  10. Since we are in veru different financial situations I wont even bother you with what I would do haha.

    If I were you I would put some towards the new website to get it up and running a bit more ( I know of a lady who does freelance work if interested *cough cough*) and honestly since you pay for vacation with points id save it towards upcoming tax instalment since you know it’s needed.
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  11. I would dump it into a SEP or SoloK but that’s me. I see it as found money so I would put it toward something that will have the greatest affect on you in the future.
    Michael Solari recently posted..We Have a Trust – Should You?My Profile

  12. I’d put it in our Roth IRAs for 2014. In fact, we made a similar tax mistake and will be getting a similar amount back and that is exactly what we are planning to do with it!
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  13. I’d use it to pay off another student loan myself :) But in your case, I’d use what you need for your first estimated taxes and invest the rest – I assume you’ve been saving for that first estimated payment already, so just top that off and let it grow
    Mom @ Three is Plenty recently posted..Early Retirement PlanMy Profile

    • Yeah, that’s the problem. If I pay my estimated quarterly taxes with it then I will just move the surplus into my business account.

  14. Nothing wrong with boring! I’d put a chunk of it in the Vanguard account…but with $6500, you can probably spread it around to the other categories too. Well maybe not the last one!
    Andrew@LivingRichCheaply recently posted..Are Personal Finance Bloggers “Pound Foolish”?My Profile

  15. I like all your options! They all sound pretty nice to me. I would love to put a nice chunk of money away for retirement but I know that wouldn’t be nearly as fun as putting it towards vacation or your new website. BTW I completely agree about owing taxes on April 15th. I normally like to be just a little bit overpaid so that I don’t have to write a check. Usually my refund is $400-500.
    Liz recently posted..My Career as an AccountantMy Profile

  16. I would invest it. Seems like you have vacations pretty much covered.
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  17. Well, I am paying a good amount this year. It happens! I would probably save it up and then use some for a little vacation!
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  18. Our next mortgage update is on this topic (though not from a refund, just from not adjusting to DH’s take-home pay now being double what it was as a professor). Spoilers: So far we’ve put an extra 1K towards the mortgage, above what we were pre-paying, we’re spending 3.5K to retool the a/c (turns out we don’t need to replace the furnace, so not the full 5K), and we just bought an awesome digital piano for under 1.5K. Now, we’re already putting, um, 44K/year towards retirement (and I’m still on the fence about back-door IRAs this year) so I figured we could do a little spending.
    nicoleandmaggie recently posted..Are PhDs entitled to tenured jobs? A deliberately controversial post.My Profile

  19. Don’t feel guilty about getting a refund your first year out. Now that you have a better handle on income, you can reduce your tax payments in and have more cash available to do what every you choose. Just make sure you pay in enough to avoid the underpayment penalty. I’d probably throw the refund at a home repair project we have coming up. Even though we have the money sitting there it would be nice to use the windfall and not deplete our home repair reserve. Otherwise, since we are retired already and have our vacation basically paid for, I’d probably invest it. Maybe by a speculative stock that I’d never dream of getting ordinarily.

    • Thanks, Kathy!

      Yeah, we definitely aren’t paying in as much this year….which will be nice. I knew I was paying too much last year but I wanted to be on the safe side. $6,500 isn’t that bad either. I know people who got a 10K refund!

      I have never bought an individual stock in my life. I’ll leave that to the people who know what they’re doing!

  20. You gave the government an interest-free loan of $6,500… ORRR you forced yourself to save $6,500.

    If I were to get that amount tomorrow, I’d send it straight to debt or toward tax-advantaged retirement accounts. For me, it’s never a good idea to leave myself open to temptation.
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  21. Since you are growing a business empire, I would invest it back in the business whether to fund taxes or growth of the company/new website. You are young and have plenty of time until retirement, but now is the time to grow your “brand(s)” and I personally think you are a brand worth investing in.
    Shannon @ Financially Blonde recently posted..Financially Fit Activity – Museum VisitsMy Profile

  22. I say let it all ride on red in Vegas! ;) Seriously though, I’d be inclined to put it towards retirement or your second site or even both. :) I’m hoping we end up in this situation, though I’ll likely be mad as well…but not as mad as if we owe $6,500!
    John @ Frugal Rules recently posted..How to Handle a Job Layoff When You Have No SavingsMy Profile

  23. Our combined tax refund between Federal and state? $26!! I don’t think you can get more accurate than that! The only catch is somehow we owe $982 for Fed and are getting $1,008 back from the state. So, we didn’t exactly nail it. Anyway, we’ve never been that spot on before.

    Anyway, if we got $6,500 back, we’d take boring route. Put it aside in regular savings where ultimately it’d probably be used for a down payment on a house.
    Mr. Utopia @ Personal Finance Utopia recently posted..We’re Having a Girl! Wait, We’re Having a Girl?My Profile

    • Hey, that’s pretty darn close. Good job, you guys! I wouldn’t mind paying in the $982 if I knew I was getting the $1,008 back at some point.

  24. I would take a little and put it towards the new website, then stick the rest in the retirement fund. When “extra” or unexpected money comes my way, I like to stash it in savings.
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  25. I would probably buy my mom a new, used car. She really needs one but is permanently disabled so is only receiving enough money to survive.

    The rest, I would use on paying off my debt. I’m lame like that.
    Michelle @fitisthenewpoor recently posted..New Business Chronicles V: The Husband’s PerspectiveMy Profile

  26. You guys are doing just fine with cash flowing vacations, so I wouldn’t do that. I’m also assuming that you set aside a portion of your earnings for taxes, so I wouldn’t use this for taxes either. So I would use some of the money for your second website and toss the rest into retirement.

    What about the mortgage though? I always throw my tax refunds at the mortgage.
    Leigh recently posted..February 2014 net worth update (+3.2%)My Profile

    • I already have the money set aside for taxes so using the refund for taxes would just make me have a savings bubble somewhere else.

      We’re overpaying on our mortgage some but waiting to see how Obamacare goes before we start overpaying heavily again. We may have to get creative to get our taxable income down.

  27. I think you should take that money and turn it into a grand experiment and write about it. “How I doubled my $6500 refund In 12 months by…” using the vanilla reloads, projected savings of interest by plopping down “x” as an extra payment on the mortgage, stock purchase, etc. I could go on and on in different combinations, I bet you could too.

  28. I would say retirement (boring) or further business investment in the form of your second website. Right now, I’d probably go with the second option…
    moneystepper recently posted..Becoming debt free: How I paid off over £100k in consumer debtMy Profile

  29. I think the best way to think about it is the “Sweet, I’m getting $6,500 back!” route lol! At least for me it would help save my sanity ;) If I had that much money coming back to me, I’d probably use the money to fund my business. I’m starting a kids dance company now and with microscopic funds. So if I had an extra $6500, I’d be thrilled to pieces! I liked your idea of putting it towards your new website. The rest of your options sound like they can handle themselves. But then again…. VEGAS, BABY! :D
    Sharon recently posted..“Someday” is not on the calendarMy Profile

  30. Sorry I’m not familiar with your tone. The line ” I know you’re angry and upset, and I totally get it. ” is confusing. Why would I be angry or upset that you made a mistake? Perhaps this is sarcasm that I’m not reading correctly?
    Leslie Beslie recently posted..Pinata Cake Instructions With Surprise M&M’s InsideMy Profile

  31. 1. Who cares about an interest free loan to Uncle Sam. If that money was sitting in a bank it might aswell have been interest free too, so unless all that money was invested you didn’t lose much.

    2. I would probably do $1000 in a vacation fund. Then I would take $500 to Vegas and do something fun like a show (Michael Jackson One and O are both AWESOME) and a great dinner (I really enjoyed the Voodoo Steakhouse for the food and the view). Whatever is left of that $500 could be gambling or whatever (machine gun shooting anyone?). I would then take the remaining $5K and drop it in my taxable Vanguard Account and invest it. In the end you get to do a couple fun things and then one mature thing.

    • Or you could take that finaly $5K and drop it into your kids 529 plans and get the $1000 tax credit from Indiana on next years taxes and lock in a 20% return (also a boring and mature like idea)

      • That is an excellent idea, Brian! We put some money in at the end of the year last year, but didn’t make the full 5K for the year. That tax credit is a nice bonus for us Indiana peeps!

    • I would like to see a show in Vegas. Last time we planned to but it was hard to commit when we were having so much fun. The best dinner I’ve had in my life was at Hugo’s Cellar in old downtown Vegas (I think it’s in the 4 Queens?) It was expensive (Like $130 for the two us of us) but amazing.

  32. I have a huge tax refund coming back too (loads of tuition credits) and it’s all getting thrown on my debt.

    I love Kim’s idea on how you made that money into way more money (without investing) just by using all your current money “tricks” and hacks.
    Alicia @ Financial Diffraction recently posted..Paying For Health Care.My Profile

  33. We have a student loan that has about $6,200 left. It’s very low rate (2% or so) that’s fixed, and has a low payment of less than $100. Still it’s pesky enough that I would probably take that money and just get rid of it.
    Money Beagle recently posted..I Wasted $11 By Not Following A Simple RoutineMy Profile

  34. This might not be the ‘proper’ idea fir growing wealth, but what about taking a few hundred dollars to let your girls pick out something like materials for a swing set or play house or amp up their playroom now that you have a big mew house :)

  35. I would put it all toward my student loans. That would knock one out and a decent chunk of the other! All of these sound like good ideas. Hell, one of my coworkers just went gambling and said she brought $3,000 with her… In any case, I think putting it toward your second website could generate some nice returns, along with retirement savings. Then you could allocate around $1,000 toward your next tax payment.
    E.M. recently posted..Financial Lessons from The Big Bang TheoryMy Profile

  36. $6,500 on RED! Holly needs a new pair of shoes!

    I’d park $1,000 in a vacation fund (for those “extras”)
    Then put the rest in a Vanguard fund to use for whatever later :)
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  37. I would invest about 75% of in dividend stocks and use the rest to build your second site.
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  38. Doing a little bit of everything you listed is probably what I would do. Have a little fun and be responsible is a great mix.
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  39. Yeah I guess the smart thing to do is to re-invest in the business with your 2nd site. :) It would be fun to buy each kid a google stock too. ;)
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  40. I would add it to my investing.
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  41. We are paying this year, and I know we didn’t give the gov a tax free loan, but I really wish we weren’t paying! I would totally spend a little on vacation, and I’d pay my taxes. If we ever do get refunds, we apply them toward the next quarter. Boring, yes, but at least you never see the money to have it hurt when it’s leaving.
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  42. I hate owing the government too, so I don’t blame you for putting some extra taxes down. How would I spend $6500? That’s a lot of money! I think I’d put it in my retirement savings account. That would provide a nice little boost.
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  44. That’s a pretty big refund Holly. I hate owing at tax time too. It’s the worst. I would definitely do some sort of vaction/retirement/ letting it ride on black sort of split. But, then again, I’m a sucker for gambling
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  45. If anybody is still reading this thread, our “Ask the Grumpies” today wants to know what to do with $120,000+ that they have sitting in cash. (Click below for more details.)
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  46. I’d either pay it toward the taxes for this year or put it on the mortgage. I know, boring. :-) Maybe you should take just a bit and do a spa day for yourselves. :-)

  47. I like that you thought about “Vanguard account” as one of your retirement options because i have a Vanguard, actual name of my full life insurance with dividends. Then give some of the $6500 to other people, as anonymous of course. Like spend $650 on food for the homeless or give it to charity. I know you worked hard for that money but still. Its a great feeling giving to the poor, especially if they don’t know you.

  48. I’d say it’s a nice problem to have ;)

    I usually expect a little bit every year. I know the insanity of lending the government money but I also refuse to owe them money every year, so I try to have at least some money coming in every April. This year though, who knows, what with me on a long maternity leave and my husband also on paternity leave, I’m not sure I’ll have the same problem as you!

    But if I did have $6,500 to spend (or any amount I might get this year), I plan to spend it on seven accounts: down payment savings, college savings, my IRA, my husband’s IRA, vacation fund, emergency fund, and future car savings. I don’t know why I just can’t pick one so they all get the same amount lol.
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  49. A holiday, definitely a holiday! We managed just a few days away last year and will be lucky if get that again this year. I’m working hard to ensure that we get 2 weeks in the Med next year.

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