There are times in life to be a spendthrift and times when being conservative with your money is the best choice. A tax refund isn’t the best thing to be loose with when it’s burning a hole in your pocket.
Everyone’s financial situation is different, so I don’t want to pretend to tell everyone to eat their vegetables and do what my wife and I are doing with our tax refund — put it in the bank and forget about it. But as a freelance writer with a varying income, and as someone who is a lifelong saver, putting our federal tax refund in the bank is an easy choice.
The average federal tax refund this year is $3,120, according to the Internal Revenue Service. Our refund is well north of that figure, mainly because I paid quarterly taxes in 2015 and had a fair amount of tax breaks from the websites I own.
I could use the tax refund to pay quarterly estimated taxes this year, but I don’t need to make those payments due to a few tax reasons.
Eating my broccoli
So where is the refund going, exactly? Into a boring one-year CD that pays 0.7 percent interest. I know, it’s as boring and as good for me as eating broccoli. I might as well stash the money under a mattress.
One reason I’m putting it in a CD is so that I’ll forget about it and will get an email reminder in a year that the CD has expired. I’ll then use it to pay our federal taxes for 2016.
I should note that getting a tax refund isn’t part of my budget plan each year. My goal is to come as close to breaking even as we can on our taxes each year so that we don’t get a refund or owe any more money. Or maybe owe a little bit or get a small refund. Continue reading