What Will You Do With Your Tax Refund?

My answer to the question “What will you do with your tax refund?” is usually “What refund?”, but for a change I might be getting one this year.

When contemplating what to do with any potential refund I was reminded of a comment on an old post about windfalls. The comment pointed out that there’s no real reason to treat a windfall any differently than you would treat regular income.

I’ve always thought that was an excellent point. After all, your goals don’t change just because your source of income does. (Or do they? Mine don’t, at any rate.)

So why do people often treat windfalls differently? Part of it could be how we grew up. If you got money for holidays or your birthday as a child, you may have been taken shopping right away so that you could spend it. Or it could be advertising (at least as far as tax refunds go). There are plenty of businesses out there with suggestions on how to spend your refund.

I wonder though if most of us just aren’t used to getting unexpected sums of money, so we don’t know what to do with it. (Of course, some people deliberately use tax refunds as a sort of enforced way of saving up for large purchases or treats, so that’s different.)

When it comes down to it though, there are basically four things you can do with money: save it, invest it, spend it (either on items, experiences, or debt), or give it away.

So what will you do with your tax refund, if you’re getting one? (Or what would you do with some other type of windfall?) Is that similar or different from what you normally do with your money?


  • If I get a refund (I think it will be close, I haven’t spoken to my accountant yet), the money will go straight into my pay-off-debt account.

    It’s so easy to look at found money and just spend it right away, but it’s so much more powerful to simply act like you never had the money in the first place and put it toward your savings or debt payoffs.

  • Sounds like a useful thing to do with your refund, if you get one. You’re absolutely right too about the different ways of looking at found money.

  • Since I got married in 2009 and my husband was laid off due to the banking meltdown, I am going to get the largest refund I’ve ever received. (Side note–I know the conventional wisdom is to not get a refund at all, but for those of us prone to pissing away smaller sums of money, a refund can be a great way to pay biannual and annual expenses like car insurance, etc.)

    I would love to say that we are going on a trip to New Zealand because I have no debt, a fully funded retirement and savings. Sadly, that’s not the case (yet!). So, I’ll be paying down debt, paying biannual bills I set aside to be paid specifically by my refund, and buying a couple of things that we didn’t expect to need yet. Namely, a new bed. But lo, am I kicking myself for having debt, which will eat most of it. :(

  • We probably won’t get a refund. If we do ever get one, we’d split it 50/50 between our Emergency Fund and our Vacation Account.

    That’s what we do with any extra money at the end of the month too. That rarely happens (you can see our monthly budget in my blog), but once in a while, we’ll have a couple of hundred dollars left at the end.