This year I think I’m going to end up with a tax return in the $4-6000 range. This has always been a huge part of our financial planning because of our inability to save money on our own.  We’ve always used it as our "force-us-to-save" method.  (I know, lame.)  The problem with that (and our solution) was addressed in my post about how to choose your W4 elections.

Photo by flippin’sweet

So, this is the last year we’re PLANNING on getting a large return, but people still get returns pretty often…so my question is, "What will you do with your tax return?"

Obvious Options:

• Blow money - spend away!
• Apply toward bills/debt.
• Save it for emergency or rainy day.
• Invest it.
• Pre-withhold for next year’s taxes.

I’m sure there’s lots of different variations on the options I listed, but I’m looking for some personal spin on these.  That’s what makes it interesting, especially with the huge range of amounts possible.

My Plan

My plan at this point is probably just to establish my emergency fund and get ahead on my bills.  One thing I’m going to do just a little different though, is start building up the "next month’s budget" ahead of time.  By the time I get to March 1, I want to have every dollar I plan on spending available in my account so I can just start paying bills and stuffing envelopes full of money for the entire month.  This living paycheck to paycheck thing really sucks.

As for the emergency fund, $1000 just doesn’t seem like enough for me.  With such a large family and all the chaos that comes with it, I would feel much more comfortable with $2000.  I don’t think that’s too unreasonable.  I’ve always heard Dave Ramsey tell people below the poverty line with small families that $500 is enough to start, so why not apply it the other way a little?

In order to do exactly what I need, I’ll be using $2000 toward the emergency fund, and roughly $5000 for a monthly expense buffer.  I know that seems kind of high, but that’s the budget for us.  I don’t think I’m going to get a return quite that large, but I think I can get the buffer in place and start toward the emergency fund.

So how about you?  Got some bills lined up already?  Vacation plans?  I’d love to see what everyone else is getting return-wise and how you plan to use it.