I’m rich! Sort of. Not really…
Posted on February 22nd, 2008 – 4:53 PMBy Kara McGuire
There is exactly one time in the year when I don’t feel poor. You guessed it…tax season baby! I normally complete my taxes as soon as I get all my W2s because I want my refund ASAP. Part of it is psychological…want to get the New Year off to a good start. On the flip side, if I knew I owed Uncle Sam money, I would probably wait until April 14.
Thanks to the miracle of E-file and TurboTax (like the George Foreman Grill, I swear by that thing) my bank account was recently credited with a nice tidy sum of $3,000. But what to with the money? This is literally the one time of the year I can play with some coin. But what to do? Man, this is nerve wracking!!!!
Should I put the money in a CD or savings account? Or invest in a Roth IRA or some other investment vehicle? Pay off debt? Be a patriotic American and buy crap I don’t need? Oh wait, that’s what the economic stimulus bill is for…
What makes my dilemma even more crucial is the crappy economy. I want to put away something but still have access to cash when I need it in the event of…say..a layoff? Or as my company calls it, the realignment of expenses to revenues.
Appreciate some advice. Also, tell me what you normally do with your tax refunds.
This is my last blog posting. Your trusty Kara McGuire returns Monday with tales of scandal and intrigue from her vacation in Mexico. Well, I don’t about scandal and intrigue but I guarantee she’s probably a lot more tanned than we are.
Enjoyed all of your comments. Peace out yo!!!!
10 Responses to "I’m rich! Sort of. Not really…"
Why not fix your withholdings so you stop giving the government an interest free loan?
Now what’s the fun in that? And what will I write about the next time I do this blog?
Bought a digital SLR with mine. High interest savings for the rest.
A Roth IRA?
Well, just another reminder how the wealthy get all the breaks. (If your income exceeds 117k, not an option.)
Kara,
I don’t qualify. And despite my extremely high monthly, quarterly, and EOY tax payments, I don’t need to plan for a refund. Haven’t had one since “81.”
For you, I agree with the first comment. It makes no sense to allow our government to use your money. You could divide the amount of you refund by 12, and contribute to an interest earning mutual fund or stock of your choice.
I’d like to sympathize with your current employer/employee relations, however It may have been wise to adapt to what your customers wanted. Your management team is out of touch, and is responsible for your newspaper’s current situation.
Kara- I’d like to see an article or blog post looking at which of these options makes most sense given the downward trend in the housing market: making home improvements (interior and exterior updates such as windows, flooring, new appliances, etc.) or paying down principle.
We have a little extra money to play with this year (tax refund and a year-end bonus) and want to defray the dropping value of the house we bought two years ago.
What’s best? Or is it a losing battle and we should invest the money elsewhere?
“which of these options makes most sense given the downward trend in the housing market: making home improvements (interior and exterior updates such as windows, flooring, new appliances, etc.) or paying down principle.”
Depends on how long you plan to live there. If it were me, I’d spend money first on stuff that will save money elsewhere. For instance, are you losing a lot of energy out of your windows? If you’re going to live there through another heating season, move the window repair or replacement up the list. Also, what’s your interest rate? Adjustable or fixed? If you’re going to be in the home long term & are locked into a crummy mortgage, look into refinancing. On appliances, are they old & inefficient? Replacing a 20 yr old refrigerator can be a financially prudent move.
I’ve long been a fan of getting that big refund at the beginning of the year. It gives me a chance to pay off some little bills that have accumulated during the year. If I adjusted my withholdings, I wouldn’t have much extra anyway and I wouldn’t feel like I accomplished something major financially.
I’d go on a vacation with $3k. Instead, I have to pay the real estate agent who sold my house (I came out on the short end of the deal, but hey, it’s not my problem anymore). Hopefully I can pay off a med bill and a little credit card bill (two actually). Then I just have the big stuff…
Good followup questions, bsimon. We plan to live in our house for at least two more years, potentially another five years. The house is 21 years old.
We have an interest-only first mortage at 5.75% and an home equity line with about $30K on it with an 8% interest rate. The former is an ARM that goes variable in 2 1/2 years. We didn’t have money to put down to get everything into one mortgage but our gross family income has jumped nicely in the last couple years.
So here’s the dilemma: There are some things (windows, furnace, AC, water heater) that are operable but could be replaced to save energy … but since we don’t plan to be in the house too long, I’m tempted to put money toward that home equity line so we’ll have more equity (money toward a down payment) for our next house. In other words, because the market is down and I don’t know that improvements will do much to bump the house value, I’m thinking that paying down principle will save me more in interest payments than I’ll gain by using the money elsewhere.
Figuring this out has been tough for me because I can’t seem to find any existing articles about how to navigate this issue and I don’t want to talk with most financial advisers, who will just try to sell me their mutual funds.
CSE - you need to find a new bank for your HELOC as with the latest rate cuts my rate dropped to 5%.
The downside to putting off improvements is that may impact your ability to sell the house for top dollar as buyers today are very picky about what they’re buying. The housing market may improve later this year or in 2009 but it’s not going to be like it was as buyers has too many options.
We made the decision over a year ago to stay in our current house and to add on and remodel. It was a significant financial expense and very inconvienent to live through for 9 months but we liked our location and we avoided the housing market situation.
I had wild plans to do the crazy consumer thing with my tax refund - and then the city called. Unfortunately our city will be doing road improvements, so a chunck of this money will go towards paying that assessment, and the rest likely towards an extra mortgage payment for the year.
