Wednesday, October 10, 2012

31 Days to Financial Freedom, Day 10: Tax Return

I'm not sure if this will be the best advice for everyone, but I can only tell you what works best for our family.  What works best for us is getting a larger sum of money back from our tax return instead of having that money every week.

I know this because I got a very large raise last year.  I went from making $10.00 per hour to making $18.00 per hour.  That's an extra $16,640 per year.  And I have no idea where that money has gone.  We live in the same house and I actually drive a car with a cheaper monthly payment than I did before I got the promotion!  The only thing I can say for certain is that we went up a package on our dish network and now have DVR.  That's the only expense that I can say with certainty has increased since I received my raise.  That's why I don't think we would do better having more money throughout the week, versus a bigger paycheck.

Pen and I each only take one exemption so that we will get a bigger tax return at the end of the year. That's not what everyone should do mind you. I don't mind giving the government a short term loan that they pay me back for every February. I obviously can't be trusted to put that money into an account and leave it somewhere, and this is just what works for our family. Some of the money from our tax return for 2012 is already spoken for. We've always handled our tax returns pretty well. After we were both working full-time (after the birth of Piglet 1), we used the first two tax returns to pay off medical bills and credit cards.

We always make a wish list of things we want to do with our tax return, then once we know how much money is coming, we can figure out if we'll have enough to do it all, or wait another year.

Last year, we got $18,000 back on our tax return.  You're looking at that number correctly.  $18,000!  We received credits because Pen and I were both in school, both our children were in daycare, and we bought our first house.  $6,000 paid off our car (which we promptly sold . . . piece of crap), and $8,000 put a new roof on the house.  We spent about $600 on a family vacation to the Wisconsin Dells (loved it there!).  There were a few more expenses here and there, but that was the majority of what we spent it on.  In past years, we have recarpeted my parents' rental house we were living in, bought a couch, filled up our freezer with meat, and bought bicycles. That's not to say that every penny of our tax returns have been well spent! We've wasted quite a bit just because we've had the money in the bank.

This year, we'd like to drywall and carpet two rooms in our house. We have awful, lumpy texture in four of our rooms downstairs (two living rooms, office, and the toy room), and I haven't been able to hang any pictures or decorate because it's so awful! We also want to buy a portion of a cow and a pig, have enough money to go on vacation next summer (we vacation for cheap! No Disney World vacations for us (yet!)), and add to our savings account.  After I file the return and I know how much money we'll be getting back, we'll see what is doable this year. 

Having a bigger chunk of change given to us every year is what works for our family.  I never want to owe anything in taxes, so I'd rather be safe than sorry!  I always look forward to tax time, and file our taxes as soon as we get everything we need to do it.  I normally use HR Block's At Home program, and I always find it easy to use.  Once year I filled out all the information for block HR Block and Turbo Tax, and I got about $500 more with HR Block.  I'll take that $500!

So - what do you guys do?  Do you get a bigger chunk of change, have to pay taxes, or break even? 

This is not a paid advertisement for HR block.  I wish!!  These are my own opinions and I have not been compensated in any way.

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