Answer: Be a student, and start a new job halfway through the year.
Actually, I have no idea how to get a monster tax return, but this worked for me. I’m still not sure how this happened, but I’m staring at a massive tax return. How massive you might ask? This massive:
I know! I’m not going to believe it until I see it deposited into my account, but in the mean time, I have big plans for this baby. Actually if I could spend it on anything, it would be on this guy:
This wouldn’t be a personal finance blog if I blew this on puppies, but for me, the default option isn’t to put it straight on to my debt. A month ago, that would’ve been the case, but since I recently got engaged, I have multiple priorities that need to be addressed. Hence, there are a few options for this baby. I’ve already decided to keep $443.79 of it aside for some trips I have planned this summer, but I still have to make a decision about the other $5,000.
1) Use Your Tax Return to Pay Off Debt
This is an appealing option. $5,000 on my student loan would go a LONG way to reducing the number of years left before I pay that sucker off, it would also mean that I will be 90% of the way towards my 2012 goal of paying off $7500.00 in debt principle – in March! If I wasn’t engaged, this would be an easy decision. My fear with this choice is that half way through saving for the wedding I’m hit with some kind of emergency that will deplete my emergency fund and force me to stop saving for the wedding in order to replenish it.
2) Save Your Tax Return
I’ve already decided that I’m going to need to have around $5,000 by the time my wedding rolls around in the summer of 2013. I arrived at this number, did some financial manoeuvring in my budget and figured out that I can save that much, but I will have to be very diligent. Almost the next day, news about this refund falls in my lap. Thus, it is very tempting (even though I know it does not make mathematical sense) to put this refund into a savings account and know that, no matter what emergencies arise, I will have that money come wedding time.
I really need to give my fiancée credit for this one. I was agonizing to him what to do, whether to put it into the wedding fund or on debt, and he suggested the novel idea of doing both, of splitting up the return and putting a bit on debt, and a bit into a savings account. That way I still get to put a big dent into my student loan balance owing, and I can jump start my wedding fund with enough cash that it could withstand being neglected for awhile should an emergency occur.Win-win! I’m not sure why that didn’t occur to me, but I’m glad it occurred to him!
And Before You PF Bloggers Start Disagreeing with Me
I KNOW that not putting all of my money into debt repayment is, mathematically, not a good thing to do. I KNOW that I am basically costing myself money because the interest I’m going to earn is near as much as the interest I’m going to be charged on my debts. But you know what? I don’t care. I’m extremely risk averse and I will sleep a lot better at night knowing that I have at least some money saved for my wedding.