According to the Internal Revenue Service, the average tax return in the U.S. in 2012 was about $2,700. For most people, 2,700 bucks is a significant amount of money. And in recent weeks, I’ve seen multiple Facebook posts proclaiming the giant windfall of cash that people were so darn excited to have. ”I spent my tax refund on a flat screen TV!” “I can’t wait to get my tax refund and buy some new furniture!” Ummm…I don’t get it. It’s your money. You didn’t win the lottery. You just spent your own money on stuff, right? But I digress.
I’ve often asked myself why anyone would want to forgo that much money out of their paycheck throughout the year. I am one greedy bastard, and I try to squeeze all of the money out of mine that I possibly can. On the other hand, I really do think it’s more complicated than that. I, myself, have even had a difficult time estimating what my taxes will be in any given year. Ours can be complicated and include variable items like rental income, investment income, and the often unpredictable freelance income. A few years ago, we got back nearly $3,500 in our federal tax refund. Horrified, we changed our withholdings immediately. Even after making some changes, we still got back around $1,200 this year. Since we are free of consumer debt and have a hefty emergency fund, we chose to throw our tax refund into our vacation fund. Here are some other wise uses for your tax refund: [Read more...]