Have you done your taxes yet? The sooner you finish them, the sooner you get your big, fat income tax refund back. But don’t hit the town or bars on a spending spree just yet.
You have to do your chores before you can play.
In this case, that means: If you don’t already have an emergency savings account, first use your income tax refund to create one. If you do already have one – congratulations – just add at least 10 percent of your refund to your emergency savings account. Then, whatever is leftover you can treat yourself however you like.
We filed our federal and state taxes in February to get our tax refund back as soon as possible. We owed the state of California $111, but we received a federal tax refund of $1,844. (This was our first time filing taxes jointly as a married couple, so it was sweet to see such a sizable chunk of change for our tax refund!)
We stashed $1,000 in our ING account, thus achieving one of my financial goals for 2010: Build a sustainable emergency savings fund of at least $1,000 (one that we’re not dipping into every month or two).
I like online savings accounts because they tend to have higher percentage yields than regular banks’ savings accounts. Our current interest rate at ING is 1.1 percent, which is way lower than the 4.25 percent it was when I opened it about three or four years ago, but still better than a traditional savings account.
But I Didn’t Get a Tax Refund This Year
If you don’t receive a tax refund this year, and you owe the government money, that sucks. I’ve been there, and it is definitely not fun. While you don’t want to have a ginormous refund, you also don’t want to owe a ton in taxes either.
However, having to pay the government should be motivation to start an emergency savings account. Start super small to ensure you don’t dip into it every other month like I used to do. Set up an automatic withdrawal from your checking into a savings account of just $10 a month. If you have no problem maintaining that after three months, increase the amount by another $10 and test drive it for another three months.
I Heart Turbo Tax and Mint
When it comes to filing your taxes, I recommend using Turbo Tax (I’m not affiliated with them). I’ve used them for the last four years now, and it really does make doing your taxes easy. Plus, it offers a FREE tax filing version, which is great if you’re young, single and have few to no investments.
This year, since we filed our taxes jointly, we used the Deluxe version of Turbo Tax, which is $29.95, plus the cost to e-file with the state, which I think was another $20 to $30, but don’t quote me on that.
I also just discovered that the same people who make Turbo Tax are behind Mint. I’ve been using Mint for several months and adore it. (Once again, I am not an affiliate with them.) Mint is a FREE financial tool that helps you create budgets, track how and where you spend your money and see what your spending trends look like over time.
Do you have an emergency savings account? Have you tried Mint or Turbo Tax already? What did you think? Are they helping you stay in control of your finances and manage your money better?
Did you find this post helpful? If so, please share it with others and/or tell me your thoughts. Thanks!