Clueless “experts” love talking about tax refunds

Ramit Sethi

Ahhh…tax refunds.

Everyone (especially virtually every personal-finance “expert”) has an opinion about them. And most of them are wrong.

I explained why this is nonsense in a blog post last year:

The average tax refund is about $3,000.

How much interest are you losing if you get a tax refund? $2.50 per month. Yes, you read that right. Two dollars and fifty cents a month. I have that much money in my shoe right now.

What’s more, if you’d had that money, you almost certainly would have spent it.

On the other hand, if you get a tax refund, Americans are more likely to pay off debt and save it.

This is a perfect example of “experts” missing the forest for the trees.

This is why I say that personal finance is more about psychology than minutiae or percentage points.

Read the full blog post here.

Long-time IWT readers will notice the difference between people who argue what we “should” do…versus what we actually do.

Question for you:

  • How big will your tax refund be?
  • What will you do with it? (Be specific.)

Leave your answers in the comments.

P.S. I’m giving away $1,001 as an experiment, which might change the way you spend your tax refund. Click here to enter to get $1,001 free.

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  1. Jessica

    Our state refund was $195 and was automatically direct deposited into our checking account. I didn’t specifically add it to our budget (yes, we use a budget), so it’ll just get spent in the normal course of things, and that will be $195 that doesn’t get moved out of savings.

    Our federal refund was $66 and will get deposited next week in our savings, where it will stay. All of our savings (on top of our emergency fund) is going toward three large goals–adopt kids, buy land, build a house–so I guess it will eventually be going toward one of those.

  2. Jenni

    My tax refund was $1100 (from federal and state). I put it in my emergency savings account; I’m moving in June and although I’m getting reimbursed, I want that cushion just in case.

    After the move, that money goes straight to my student loans.

  3. Amanda

    $1200 and we invested it in Vangaurd mutual funds. We also have had our’s for months since we e-filed and did a direct deposit!

  4. Meg

    We OWE about $3,000, thanks to my husband getting a lot of freelance work that I failed to account for. Luckily, I had a lot of advance notice since I did our taxes in January, so it’s all budgeted for and it won’t be a hit. It did mean I had to really stretch to finish fully funding our 2011 Roth IRAs, which I just finished yesterday.

    Withholdings have already been adjusted upward at our W-2 jobs to ensure that this won’t happen again.

  5. Caleb Huitt

    My wife and I had no refund; two years ago I reduced our withholding to account for the tax credit for installing geothermal, and last year I forgot to increase it. Thus, we’re paying this year (although no penalty; we’re within safe harbor since we payed more than last year).

    I’ve already submitted updated W-4s to increase our withholding. Next year we’ll probably end up paying a couple hundred, all told.

    If I had gotten an extra refund, chances are it would have gone mostly to an extra payment on the house, plus maybe some portion of fun money.

  6. Kurt Hauck

    We’re getting around $3,000 back and will invest it in boring dividend stocks.

  7. Christopher

    Absolutely agreed that there’s a tremendous psychological benefit to a sudden unexpected windfall from a tax refund. Yeah, I missed on a little bit of interest…but as you point it would be on the order of a few dollars at most.

    I don’t have the exact numbers in front of me, but combined federal and state refund is approximately $900. I have no debt to pay off, so that money is being divided between a travel fund I have established with some going towards a SCUBA diving class I’ve been saving for (probably about an 80/20 split).

    The small amount of lost interest just can’t compare to the emotional rush of a sudden $700 deposit into the travel fund. Trying to keep me eye on the forest…

    • Tonya

      My “refund” is always big ($3-5k) and usually used to bulk back up the savings account. It’s mostly earned income credit and child credit since I haven’t been able to find a full-time job and my child support isn’t taxable. I feel a little bad getting money back that I didn’t put into the system, but if it’s legal and the IRS is willing to give it, I’m gonna take it. It really helps me out a lot.

  8. S

    We already filed our taxes last month, and got a $7500 refund, which is going into our 401(k)s (We’re both self-employed, and I was already putting $5000 in, so this is as close as I get to employer contribution matching.)

  9. Brianna

    We got a couple grand back and finished paying off our car and credit cards. Felt awesome. Now that money we used to pay out each month is being automatically sucked into our savings weekly to build up our emergency stash. Then onto bigger and better things! I’m really excited about it all if you can’t tell : )

  10. Felicity Fields

    I just had my taxes done yesterday, and I’m getting about $500 back from state and federal. I’m launching my very first online training course next month, so I’ll use the $500 to pay for any last-minute unexpected expenses.

  11. Stephen

    Me and my wife got about $2600 back from tax refunds. We immediately spent it on paying off a credit card, as that is what we are questing after (being debt-free). I definitely agree with you now about getting a windfall and using it more wisely. I definitely would not have been so diligent using that extra monthly income to pay off debt!

  12. Jenn

    We got back ~$5k and we paid down debt.

  13. Dave

    I have a fairly large return each year due to mortgage interest & PMI, student loan interest, and relatively low taxable gross income compared to my overall compensation due to tax-deferred investments in my 401k. When I get a return, I set aside a small amount (less than 10% at most, usually even less than that) for personal spending. The rest is put toward my mortgage principal or set aside to dip into for monthly Roth IRA contributions. It’s not flashy, but it is effective.

  14. John J. Walters

    I work as an independent contractor, so I owed about $5,300. My girlfriend got almost $6k back. She filed first and then we sent her refund (mostly) right back. Then we spent what was left over on a trip to NYC as treat for us. This is the second year that we’ve done that.

    It may not be an entirely ideal system (really, I should be saving a portion of my income each month and making quarterly payments) because we don’t get an “extra” chunk of change like a lot of other people. But it does give us access to a lot of extra money throughout the year, without putting us in the hole every April.

    • John J. Walters

      Oh, and as an aside, we have no debt to pay down whatsoever.

      We’re working towards having a solid “emergency” and starting some savings for retirement.

      In retrospect, we probably should have saved what remained of the refund, but sometimes you have to enjoy life a little. We haven’t taken a vacation in quite some time.

  15. Matt

    Our refund was $3300. This was after having another another child and changing my withholding from 1 to 9. The difference in withholding and the refund went into an ING account. Not sure what the money will be used for just yet.

  16. Nick

    About a grand, and it’s going right into my savings account.

  17. Peter

    I strongly disagree with this. People who disagree with you are not clueless. People are entitled to the fare share of money that they’ve earned. Loaning it to the government and then magically getting back a “mystery amount” after a year makes zero sense — both financially, ethically, and psychologically. It’s not a question of how much one would earn in interest (though if it were a significant amount, that would certainly be a compelling reason). I do not doubt that there are psychological benefits of getting a big chunk of change like this, but that also speaks more to the psychological issues of people who aren’t able to save money from their monthly paychecks — unless in it comes to shuffling around money through tax refunds.

    • Dani

      It’s not a mystery amount; a competent accountant can give you an idea of how much it will be way ahead of time. Even with wildly variant income, a side business, and a family partnership, I’ve had a pretty good idea of how much I will get back each year, so Joe Schmoe who just has a regular job should have no problem!

      And, you know, you object to Ramit calling people clueless, but you’re doing the same thing (judging then insulting people who disagree with you) when you attribute that disagreement to “the psychological issues of people who aren’t able to save money from their monthly paychecks.”

    • Mark

      I wish there was a Like button for this post.

      The Tax Foundation, a nonpartisan tax research group founded 75 years ago, says the average American will work 107 days this year to pay the tab for all of his Federal, State and local taxes. According to the Tax Foundation, Americans will spend more in taxes in 2012 than the total amount spent on food, clothing and shelter.

      If you’re a glutton for punishment, here’s a breakdown of the Federal tab: The average American will work 32 days this year to pay income taxes, 23 days to pay social insurance taxes, nine days to pay corporate taxes, two days to pay sales and excise taxes, and three days to pay all other Federal taxes.

      He’ll also work eight days to pay State and local income taxes, 12 days for property taxes, 12 for State sales and excise taxes, and four days for other State and local taxes.

      Add it all up, and it means we all work from Jan. 1 until April 17 to pay our taxes. But it could be a lot worse. According to the Tax Foundation, if the Federal government raised enough taxes to close the budget deficit, Tax Freedom Day would not arrive until May 14. That means that an additional 27 days of government spending is paid for by borrowing — and passing the bill on to our children and grandchildren.

    • Trish

      Peter. I agree with you that those of us who disagree with what a smart move it is to loan the government money are not clueless. And the opportunity costs have been completely ignored on that $250 a month. Don’t get me started on the wealth that could be built on that little amount of dollar cost averaging. (It’s kinda like the argument that you can’t pay off your house because then you won’t get the tax write off…..)
      But I also know, from doing years of financial counseling and coaching, all of our minds work different. So while it’s not ideal, and you are in fact losing money by doing it that way; Certain people are emotional (rather than us analytical ones) in the way they handle EVERY issue. When I couples counsel the emotional responder wins every time, because they automatically are going to have a harder time sticking to the plan. You have to find a method that works for how your brain works. Or you will never be successful in managing your finances.
      (Obviously, the exception to this would be if they are going into debt over the coarse of the year because they really need that $250 to live off of and are paying interest on carrying that debt over the year.)

  18. bk

    We are getting nearly 6k back, due to tuition and child credits! It is going straight into a savings account to be allocated for travel a family member’s wedding in India! (we aren’t Indian but we are PSYCHED!) Fortunately she got engaged between us filing our taxes and actually receiving our refund — otherwise we would’ve thrown it at some educational debt.

  19. Barbara

    I’m nearly finished with our return, and we’re probably going to owe around $2,000. That’s because on top of our salaries, we have some income from a rental property and we invested in an oil-extraction project. Our strategy to make sure we don’t have any surprises come April is to put all income from those ventures into a separate account which we don’t touch except to pay any related bills. We know after the first of the year how that income will affect our tax situation, and the owed taxes are paid out of that separate account. It’s simple and obvious – so it works well for us.

  20. Elle

    We received our federal and state refunds already (around $2500 total). We split the federal return to go towards:

    1) finishing up the car fund
    2) paying down the student loan

    The state refund came in first and it was all directed towards the student loan.

  21. Joe Livaudais

    Mine was @ $3500.
    @ $1,200 paid off one credit card (still has a zero balance)
    $1,000 was applied to another credit card.
    I squirreled the rest, but will be using 1/3 of it on a child’s medical bills.

  22. Livia

    I received $1200 refund already and sent it straight to my car loan which I will have completely paid off in September. Next is the student loan and then I’m debt free!!

  23. Charles Aldarondo

    My wife and I received $2K back (even after 9 exemptions on my W-4), it went to her Roth IRA, which helped push us to the max contribution allowed for 2011. Next on the list is 2012’s Roth IRA.

  24. Mike

    Oh this is the best time of the year.. The farmer gets to milk the cattle! Give a little back to ensure the illusion that it isn’t all theirs in the end 🙂

  25. Lucy Ra

    I got about 1K back (did my taxes in February) and put it in savings. It’s been there ever since. I ain’t touching it.

  26. Barbara

    I meant to add – if we get money back (it’s happened occasionally!), we apply it to any debt. If there isn’t any debt, we save it. My plan right now is to continue accruing the income from the rental and the oil, and then when it reaches $10,000 reinvest it in another oil project. That gets us tax savings because of the depletion and depreciation we can take, too.

  27. Greg

    I received about $2200 from my returns. I don’t have any debt to pay down so most of it is getting re-invested in my side business. I anticipated ~$1900 for a patent application, and some advertising fees so this worked out nicely. The remainder will just go into my general account and probably end up being spent on coffee and booze.

  28. Joe Livaudais

    Oh, and I consider that “interest free loan of $2.50 a month” a gift to the U.S. Government. Whatever it takes for me to never have to cut them a check again.

  29. Steve

    Ramit —

    We expect refunds around $2,000 from the tax authorities.

    Some will go to our CPA; and, we will pile the rest into a cc payoff fund. We will be debt-free, except for our mortgage and an interest-free loan for our furnace, by mid-July, 2012.

  30. Jason

    I did my taxes in early Feb, but we got around $1100 back. That went into savings to help pay for the new siding on our house. That work starts next week.

    Ramit: If you give ME the $1001, I’ll throw it directly into the savings account for our NEXT big ticket item: new car… Though I might take a smidgen of it to take the wife out on a date.

  31. Jacky

    We are getting $9500 back (thank you first time home buyer’s credit!). Every last penny is being used to pay off debt we will be paying off 1credit card that has a balance for several years, 2 store credit cards (we did the 0% interest for 24 months…learned about that afterwards), and most of a 2nd credit card that we used to buy tickets and hotel stay later this year. With the debt snow ball, we will be debt free Nov 2013 – we will have 2 student loans and my 2 year old car left to pay off; we also have a house loan we will try to pay off in 15 years or less (we bought in June 2011).

  32. Pat

    I guess we’re average in our refund amount. We are paying off cc debt so it’s going for that.

  33. William

    $2850 1/3 goes on the credit card. 1/3 to take a much needed vacation. The last 1/3 for misc house projects / repairs.

  34. Von Berry

    I owed $2000 dollars this year. But I have the cash to pay it and will not suffer because of it.

  35. David

    We netted about ~$500 dollars between Fed and State. The money is going to pay for a trip to New Orleans for a friend’s wedding.

  36. Susan

    Our tax refund was just enough to cover the quarterly payments I’d need to make on my disability income for 2012, so we just applied it back towards those payments. That way, I don’t have to file quarterly, and I don’t have to remember to keep coming up with a big chunk of change each quarter.

  37. William

    By the way, when you put it in perspective of only $2.50 per month loss on that amount of money it really shows how stupid it is to fuss and fret over how much is being withheld.
    Great post Ramit

  38. Bri

    We got about $700 back from the feds and owed the state $500. Not too shabby. So if you assume a $3000 average refund, that’s $250/month that we’re keeping in our pockets. Considering I’ve added an additional $200/month to our principle payments this year and my husband is busily socking money away for a future car purchase I think we’re doing ok…

  39. Luke

    I received a little over $900. I used that money to go towards paying off the last $1,000 on my car. Sure I could have spent $17.44 (plus interest!!) on stuff I didn’t need each week, but paying off a car isn’t going to destroy my personal finances.

  40. Pasadena

    While I can understand how this is considered a “windfall” by many, it really isn’t, right ? I also get that most people would have spent it during the year, hadn’t they given it to the IRS to keep for them.

    It’s not so much a 0% loan as forced savings. It’s exactly the same thing than those infamous “extra paychecks”. Your employer is forcing you to save that money, at 0% interest, while it’s being put to good use by them. Some (most) of us need that. I do, sometimes.

    But you shouldn’t be simplistic for the sake of simplicity. You mention interest. Good one, especially with the current rates. But that’s only one possibility. What about opportunity cost for example ? What if instead of just saving it in ridiculously low-interest accounts, people had invested it ? What about those people who get a HUGE return and use it to pay down debt ? How much more money did they pay during the course of the year by not paying it down every month, or by accumulating even more debt ? Aside from tax returns, do you really think putting money aside all year and sending a lump sum towards debt once a year is financially a good idea ?

    So ok, tax returns are sweet, and sometimes that sweetness is worth a few dollars lost. But that’s not always the case.

  41. Living off dividends

    I expect a refund of 5000, whenever I get around to doing my taxes. I always do them late.

  42. A-ron

    I like getting a refund. Makes me feel like I cheated the system or did some clever gymnastics with my tax return.

  43. Chris

    I had a refund of $4500 fed and state due to a side business start up this year. It’s all going into my wedding fund for June. Everything left after the wedding will go towards credit cards, also from the business start up.

  44. Penelope

    I’m getting $279 back in Fed tax, and I’m paying $96 in State tax. The money will go in/out of an account I have set up for “extras” (everything else is automated) so I guess I’ll just have more money than usual for eating/drinking out.

  45. Asish

    Rather than focusing on losing $2.50/mo in interest, we should focus on how the quality of life would improve if we had the extra money each month. When people are struggling to make ends meet, the extra cash does help. Don’t you think so?

  46. Tanya

    Getting about 5K back, going finally open an IRA this year.

  47. Alan

    Put half toward student loans, a quarter towards savings, and the last quarter for car repairs minus 5% fun money!

  48. Roger

    Not carrying any debt on any CC cards espically my AMEX that you recommended. Money will go straight into my Roth IRA 2012 contribution. Most likely will split it between buying ACI, CIM and IVR stocks. Coal stocks are slammed right now and carrying little debt with a market that isn’t going to disappear. To top that off ACI(currently @$10) is still paying a 4% dividend with a potential to get back up to low $20’s.

  49. Michelle

    We had a very awesome refund of about 7K combined. We paid off a line of credit, paid off our dentist bill, and put the rest of it onto another line of credit. We did not go on vacation or put up a fence or buy new clothes. We did enjoy a night out for dinner, which we almost never do.

  50. Jim

    Hi, I am getting about $700 back between both and it is the first time in 5 years I am not paying. This will go towards my goal of paying down debt, so probably pay off one of my smaller bills and then then towards a bigger one.

  51. Thomas

    We received about $5,000 from both federal and state and it along with some money from savings was used to payoff my student loan.

  52. Richard Spicer

    This advice works for your average consumption minded person, but not for your typical production minded entreprenuer. 3000 per year is $250 a month. Yes the interest from a savings account is minimal but what if you could invest this money in something that triples your money? Say… Buying one of Ramit’s programs, expanding a small niche business etc. if you have too much money coming in to not care about $250 per month you could pay down debt with now or invest in other stuff, if you need the government to save your money for you, because you’re too much of a spend thrift to do it yourself, then you need more work. An accounting student’s point of view? It’s my money and I’ll spend it how I wish. It’s more beneficial to me to have it now than to have to borrow to cover myself, pay interest in the meantime, and then pay of the debt I wouldn’t have accumulated if I hadn’t had the government keeping it for free in the first place.

  53. Matt

    Maybe I’m misinformed, but most everything that I’ve read says that most Americans blow their refunds….

  54. Lindsey

    I received $303 back from the Fed, and nothing from the state (nothing owed to the state either).

    I used that money to pay back my student loans. I am working ferociously to pay those off by the end of the year. Thing is, I need to start making more money to be able to successfully accomplish that goal (not much more, about 5k net). Now I start figuring out HOW to make that extra 5k… (I would love to earn on the side, I would be a great candidate, but I feel like I have no skills… therefore, my first battle is negating that script, and finding these skills!!!).

  55. ams

    One year I bought into the “I’m not giving the governement a loan!” nonsense and claimed something like 2 or 3 dependants. At tax time I owed the IRS one entire paycheck. OUCH! The next year, I claimed 0 dependants. At tax time I received a refund that was big enough to meet the minimums on a RothIRA. Far far smarter and less painfull thing to do.

    Also claiming 0 dependants gives me some wiggle room for untaxed income I earn during the year.

  56. Dennis

    My wife and I managed to graduate from college without any student loans, and to stay basically debt-free after graduation. Our tax return typically ranges between $1K and $5K, depending on various factors (this year closer to $5K), and each year’s return goes straight into savings toward a down payment on a house.

  57. Chicago Sherry

    No refund here, flipped IRA’s to Roth’s in 2010 when the income limits came off and now are paying the tax over 2011/2012. I would always rather pay (just avoid the penalty) than get a refund and that is what I have done for years. If you like the windfall, just set up a savings account and have your employer split your direct deposit, your excess withholding or “refund” to the savings account and the balance of your check to your usual account. It is not about the $2.50 interest but rather the opportunity cost of the money. You are free to tap your refund/savings account before you would get your tax refund or you determine when the refund check will hit and you withdraw the money.

  58. Jen Maguire

    $10,000 refund from state and federal. I used all of it to pay off debt, starting with the account that had the highest interest rate!

  59. Katy

    got back around 12k. Put it right into savings, I’m building up a large fund so that I can build my first investment property next year.

    • Dorcas

      Really, how come u got that large sum of money as a refund.

  60. August

    I got a little over $2k back and I put half of it into savings, mostly for an engagement ring for my girlfriend, and the rest went to pay down my credit card bill for the month.

  61. Elenor

    Alas, I’m the cautionary tale in the other direction. First there’s my own personal tax burden (for my web design work — with no estimated taxes paid in the first half-year; near as I can tell, this is what we lived off of for 2011 — I was a ‘kept wife’ and my late husband handled everything). Then there’s his personal tax burden (I “paid him” (his estate) out of the corporation, on a 1099-MISC, to account for the half-year he worked (he didn’t do any withholding, as he first paid himself from the corporation the month before he died suddenly in July {sigh}). Then there are the C-Corp. taxes — with, again, no estimated payments made. (Once I inherited it, I dissolved the corp. and created a new LLC, taxed as an S corp.).

    So, all told, I end up owing nearly twenty-five-thousand dollars to the Feds (and an additional 7-8 thousand to the state). (EEK!!) (No, I don’t have it sitting around, go figure.) It’s “nice” that the feds allow a payment plan, but the interest (and, I guess, reduced penalties) keep adding up even while you’re paying it down. Their new “Fresh Start” program isn’t all that great, but every little bit helps.

    Still, I am paying down my debts, recovering the company back to health (it’s a small manufacturing firm), and oh-so-slowly recovering from the loss of my soul mate.

    Ramit? Your advice across your blog and in your Earn 1K class has certainly helped me, as I relearn how to manage my personal finances and figure out how to run a company I was only peripherally involved with, in this ‘new, modern, and automated’ world.

    Next year, when I DO get a tax refund, I will start socking some money away toward retirement and put the rest toward upkeep on the house (my biggest asset besides the company). Plan ahead, folks — really really bad things happen long before they’re supposed to!

  62. ryan

    $7000. Putting the money into my roth for 2011. And the rest into my wifes roth to max hers out for the year. May be our last elidgible year for roth due to income increases.

  63. Eric

    Got married. Wife brought in some freelance money. Got 10K back in return. Spent 8K on property taxes between our two houses. The rest is saved up for car payments for the remainder of 2012 at 325/month. TurboTax best $80.00 I’ve spent this year.

  64. Ryan

    Our refund this year was $2,700. I immediately applied it towards credit card debt. I have heard that you should try to not receive a refund, but I will admit that I greatly enjoy getting all that money back.

  65. jess

    we got $3600 that was direct deposited
    600 was put towards a thank you present to my sister in law for doing the photography at our wedding
    300 was “fun” money
    2700 was put into the emergency fund as a buffer

  66. asraidevin

    We got a good return this year becuase we moved and my husband changed jobs to one in a much higher tax bracket. Half of it is for home repairs- a new deck, fixing up the shed and painting the interior and the other half is for summer vacation.

  67. Annette MacKay

    Got 7300 back via direct deposit. This went right into a self managed escrow type account that I use to pay all the big incidentals throughout the year (prop tax, auto and house insurance, vacations, etc).

  68. K.A.

    Indeed, clueless experts DO love talking about tax refunds! Apparently this clueless expert thinks his readers invest at an average of 1% per year (when it suits his argument, of course). Ramit, if all that money you’re raking in from this site is sitting in some crappy savings account earning 1% interest, then you have no business writing about ‘clueless experts’. My suspicions are you don’t, but that you use pitifully low interest rates when your argument calls for it, and higher rates when you want to justify buy and hold investing. Your readers are intelligent enough to identify the disparity, so show us some respect!

  69. Jon

    Our total tax refund was about $2,700… which we used to completely pay off my wife’s credit card debt!! It was definitely a nice perk…

  70. chris

    My wife and I received $1910.00 back from the feds. We put $950 into my Roth IRA, which I opened in January (we opened one for her two years ago and started funding it after reading IWT). We put the other $950 into our ING savings account where we hold cash for bigger purchases and household upkeep. $10 stayed in checking and will probably be spent on a latte.

  71. Lauren

    My husband and I got about $6000 back this year. We had our first child in 2011, and she she sure make the refund much larger than it was last year. We put all the money in our “house down payment” savings account. We just put an offer on a house today, so we may need it soon.

  72. Financial Uproar

    If you have credit card debt, you’re missing out on a guaranteed 18% return by letting the government hold your $250-$300 per month.

    And, like the commenter above said, you’re not a very sophisticated investor if all you’d do with that extra cash is stick it in a bank account.

  73. Mrs. Money Mustache

    Psychology doesn’t work on us. 😉

    But seriously, how many people are using their tax refund to pay down debt? I have a feeling most of them are using it to finance a new car. Hehe.

    We had to pay $1000 in total this year, which I thought was pretty good.

    I do agree that talking about tax refunds is pretty boring… *yawn*

    I’d rather talk about how cutting down on lattes can make a huge difference in your finances. Maybe even help save for your kid’s college education. 😉

    P.S. Do you own a bike, Ramit?

    • MB

      “I’d rather talk about how cutting down on lattes can make a huge difference in your finances. Maybe even help save for your kid’s college education. ”

      How much do you spend on lattes????????

      And if you didn’t spend that money weekly (daily?), would you put it towards something useful, or just waste it on other stuff you shouldn’t be buying?

      Sure, a penny saved is a penny earned, but only if you actually save it. If you save it on one thing and waste it on another, that doesn’t count as saving.

    • Mrs. Money Mustache

      Hahahaha! I almost spat out my latte after reading your comment! 😉

      There’s a reason that I put a winky face after my comment, MB. It was a joke (kinda – I do think I save a shitload by making my own lattes). I don’t buy lattes, I make them at home with a $30 machine — they taste fantastic. Some people do buy coffee every day though at about $4+ a pop (with a tasty treat to go with it sometimes?)… I know a lot of people that do. I used to do it.

      And, you’re right that you actually have to save the money instead of spending it. At this point in my life, it is much easier for me to save than to spend, so I’ve got that covered. 🙂

  74. Ruth

    I received $10,500 back since I still have a lot of tuition credits! We’re going to use that to buy a new (to us) vehicle that we need!

  75. Annie

    I got back just under $1k between state and federal. I put it in my savings, then opened a night interest savings account and a brokerage account. Both have $1k and I’ll start contributing to a Roth when I have another $1k saved.

  76. Jason

    My combined Federal and State refund was 4,000 and I am putting about 3,000 into my IRA. The remaining 1k will be used for daily spending aka credit card debt!

  77. Lisa

    I’m getting about $200 back and I have nothing specific planned. I have some friends getting married so I can count their gift as part of my refund.

  78. Tracy

    We need to stop oversaving. Normally we’d put extra money toward something practical, like our baby’s college fund, but we already automatically contribute monthly to that. So our refund of $6,292 will go into our vacation fund, for trips to New York in June and to India next year.

  79. Manu

    “This is why I say that personal finance is more about psychology than minutiae or percentage points.”

    EXACTLY! I’ve got enough savings that if doing something will only net me a couple hundred dollars in a year, it’s not worth it, because I can save that same amt (and more) in a month – a couple hundred dollars ends up being a very small percentage of my entire savings, and it’s just not worth it compared to the peace of mind I get from not exerting any effort, unless it’s a recurring couple hundred every few weeks. A one-time $200 payment, though? enh. I just got a dividend check for more than that, and I didn’t have to actively do anything to get it.

    As for my tax refund, it’s going straight into my high interest checking account. If I had any outstanding debts, I’d probably use it to cut those down, but I don’t, so it’ll sit in my account earning decent interest until I start investing it.

  80. Danny Michau

    Seriously awesome perusing all the feed back… Big question I am trying to understand ( which may sound dumb to the techno savvy amongst us) Can I and how do I get a hold of I will teach you to be rich in both Audio and written form. Is there a good secure gizmo that is not going to rip me off. I keep hearing of people getting financially raped with credit card fraud.. please help educate me whilst protecting my little but life changing personal development fund.

  81. Brian

    I used to be one of those kooky people who believed that getting a tax refund was a bad thing. I’d say things like “You’re giving the gov’t an interest free loan!” It’s because I had missed this key point:

    “if you’d had that money, you almost certainly would have spent it. On the other hand, if you get a tax refund, Americans are more likely to pay off debt and save it.”

    Because I set up automated investments, I’d still prefer to have the extra $2 per month, but I will never again say that getting a tax refund is a bad thing. It’s a personal preference that depends on your particular financial situation.

  82. Ryan B

    We got about $9,500 back – I claim 9 on my w4 and have extra income from side jobs. Half the money went into savings, and the rest into a kitchen remodel. A big chunk of the kitchen was paid for from doing side work.

  83. Compassed

    Check out why your money would be better saved in a credit union rather than a bank.

  84. Jen

    I received $1500. Donated 1000 of that to the arts. Paid the accountant some and put the rest split evenly between my fun and emergency accounts.
    Usually I get a refund and use it to pay off debt. That strategy worked along with a number of others I learned here at ramit’s sit, and I’m now debt free. Sometimes I owe. Never really sure which it will be so I always do my taxes as soon as possible so if I owe I don’t break the bank and if I’m getting the refund I get it as soon as possible.

  85. Chris

    My refund will be a little over $4,000. I actually use it to improve my budget for the following year. I run a household budget from April through March, because that way I can factor in the tax refund as part of my available to spend funds.

  86. Lily F.

    We got a little over $4,000 back on Federal and State taxes and used it to finish paying off my car. We are now just one credit card away from being 100% debt free!

  87. Tarek

    I got $2500 federal & expecting $400 from state. With federal, I had some fun, paid off a cc balance and made +50% return on a shady penny stock that made a 166% profit intraday over 2 days.

  88. Stephen

    Mine is about ~$80ish, so I didn’t do anything with it. Just let drop into the checking account.

  89. Umar

    Well my refund is going be around $200-250. But being in Pakistan that is worth much more! Since I have already devised an automatic savings plan where a good part of my money goes into respective savings. AND since I am not in much debt, I intend to use the refund to buy gifts and long due things for my wife and parents!

    Since all year I am too much bound with what I earn, this extra boost will help me out to make the people I love some what happy! 🙂

  90. Bret

    We’re getting about 11K back this year due to some surgery bills and donations we made (last year was about 9). I’m using it to rebuild our emergency fund which we used last year, and to take my wife on a vacation :), which is about 7 years overdue :(.

  91. RM

    I got $800 refund. Half went to pay-off debt and other half went to mom to help her pay for some health care needs.

  92. KH

    No state taxes, and will be getting $941 back from federal. Return will go into my savings account and is ear marked for art school once I reach my savings goal.

  93. Kate Ressman

    My refund is $961.

    $500 will be used to purchase a CD at my local bank.
    $200 will be applied to bills
    $261 will be used for books/parallel OS for my computer so that I can use already purchased software. (From when I had a MS system).

  94. Ahsan

    about 2 grand. V and MA stock…safer than any mutual fund or savings account as long as people keep using their credit cards

  95. Damon

    Tax return will be about $1300 (Federal and state) I will be paying a month of rent in advance ($700) so that i am a month ahead and the rest shall go toward my student loans. Not saving any, you ask? No, I need to apply all my extra funds to my debt.

  96. Tyler

    Put the entire refund (between state and federal it was over $3k) and then some to pay off the last student loan. That was the last long-term debt I carried. Pow.

  97. Nate St. Pierre

    I just quit my job to go off on my own, so I would use it to cover monthly expenses and extend my ramp a little bit.

    Also, I wrote about you for the first time just now:

  98. Brolin

    $1697 from IRS and I used pretty much all of it to pay off some remaining debt I had.

    Left my withholding at 0 again this year and should be getting a another $1,000+ refund which will be used toward a down payment (or larger emergency fund) next year, possibly.

  99. Heather

    $1300, and I put it into my pretty much hitherto non-existent savings. (Almost all of my paycheck goes to paying off my exorbitant student loans.)

  100. Anthony

    My refund was nearly $5k. I put 1k in savings, bought myself a treat, and paid off some debt with the rest.

    However, I did choose to adjust my with-holdings. Thanks to Ramit I have much of my money handling automated, so putting an extra $400 in to the input accelerates eliminating my student loans.

  101. Honey

    I am getting $2K back. I owe about $1800 on my LAST credit card balance (started paying off 4 years ago when I finally left school and got a “real” job) – will pay off that completely and the rest will go toward my wedding in May. I will probably end up with a balance again almost immediately due to some wedding stuff, but just seeing it at zero balance for a little while will give me the strength of will to do it again!

  102. Zach

    My wife and I ended up getting about 5k back. We used 3k to pay off my wife’s outstanding debt (extremely high APR/high balance/out of control). We socked the other 2k away for a trip to Australia we have been saving for awhile for using an ING savings account.

  103. Trevor

    I got $4,500 due to the birth of my twin boys in December and Education expenses. It’s sitting in my high-interest savings account as my fiancée and I look for an investment property.

  104. Charles

    Did my taxes early, since I get a fairly large return back, $11k. Of which $6k is socked away for next year’s property tax… This is my automated way to save for the property tax. $2k went to finishing up my wedding budget/saving (and I just got married with it). And the rest is for savings/travel/fun money.

  105. Michelle

    I think you should get a Mexican Pizza with part of your refund.

  106. Jason

    I received $1,915.00. It is sitting in my savings doing nothing.

  107. Zeke

    My families refund went to paying part of my son’s school tuition for next year. Every little bit counts.

  108. Myself

    We received about $4k back.
    I’m not so much on the “don’t give gov’t a free loan” mantra, as I am thinking that I could put that money away during the year. In other words, I’m a “control freak” that likes to control it as opposed to letting someone else control it for me.