The States makes filing early very easy. My husband had all of our information off to H&R Block by the time February came around, and we're expecting our tax return shortly. What do we do with all this "found" money?
With so many goals (namely, travel and home improvement) and necessities (debt and animals) on our plate, we have to devise a way to make sure we are doing what's best for us in the long-run financially. In my mind this most often means we throw money to the Debt Monster, but this time it means something a little different, a little more.
Let's start with household. We have a few items we've been routinely pushing aside in favour of greater debt repayment:
1) Replacing the couch cushions
2) Getting a bench for the foyer to stop the personal disaster that continuously forms there (I say personal disaster as it's the place we also store items for donation and boxes shipped from family).
Both these items are relatively low in cost, maybe $500 for both, and would add a lot to our ease of living...which is exactly why we haven't invested in them yet. Compared to the promise of annihilating debt, we'll take the increasingly saggy couch and cluttered foyer. With the tax return, though, we think we'll be able to tackle these items without the fear of chomping into our regular debt repayment.
With the remaining money we plan on dividing it evenly between our emergency fund and our travel fund. The last time we met up with Verhanika, we discussed the necessity of a six-month emergency fund. My husband and I were in disagreement about how much we'd be setting aside as our "bare minimum" emergency costs until we sat down and did the math. Now we have the rather significant goal of saving up $20,000 for an emergency fund.
This, of course, alongside our debt and travel plans.
Not an insurmountable goal; however, it is one that may alter our debt repayment plan. I've read and read and read for years now that you need to have an emergency fund prior to taking on any aggressive debt payment, but it took discussing it with Verhanika and going over it with my husband for those words to finally sink into my (admittedly thick) budgeting skull.
You need an emergency fund.
Okay, I get it now. Safety, security, reassurance, and stability. Yeah, I get it.
For that, debt repayment can be slowed (a little). We haven't quite worked out what we'll put in debt versus emergency fund, but it'll be pretty significant. (I have a secret hope we'll still magically meet our end debt by 2014December goal...but that's me denying and dreaming).
An emergency fund is a hard lesson to learn!
Okay, back to the remaining tax return.
With the funds that remain after our condo is taken care of and our emergency fund is adequately fluffed up, we're going to give our travel fund a boost. We have an upcoming trip to Tofino in July and a trip to Iceland in October (okay, my husband's still not sold on this destination, so toss in Greece/ Turkey or Belize here for fair measure), we have a lot of saving to do in order to get these trips done right.
Which pretty much depletes the tax return. I'm rather in awe at how much my financial priorities have changed over time. When I first taught myself how to budget, I thought I'd never shift any money away from debt repayment for any reason, yet now I feel like a more reasonable, but equally aggressive and ambitious, budgeter. I think this comes from having a pretty rocking budget team on my side.
Squirrel and Nest offers one-on-one and small group financial counseling services that aim to give individuals the knowledge and independence they need to get their financial lives in great shape.