Thursday, February 10, 2011

Tax Refund? What Tax Refund?

Lately, I've been coping with some "not so great" news. I don't think it's realistic for me to eliminate the car note by the end of this April. It turns out that my estimated tax return is no where near what I'd planned for it to be. Additionally, I think I might owe state taxes. I'll be turning to my CPA friend for help  =) Maybe, just maybe, the circumstances won't be as bad as I expect them to be.

Nevertheless, since reality is screaming at me not to expect a significant tax refund, I have to look at other ways to eliminate my car note and stay on track to achieve my savings goals on time. I've updated my budget to set aside more money from my "extra" paycheck in April (originally, it was $955; I plan to redirect $237 from savings to the note to increase the amount to $1192).

Assuming that I: 1) receive no additional funds (in the form of a tax refund); 2) pay an extra $1192 in April; and 3) stay on track paying an average of $1,010/month (starting May 2011), I can eliminate the car note by July 2011--three months behind schedule.

My takeaway from this planning experience is to never bank on a tax refund. If I receive anything, I should spend and save some. 2010 presented a few changes that significantly altered my tax situation, namely a new job (with a $17,000 income increase) and a new state (with higher and additional (local) taxes).

How do you plan to spend/save your income tax refund? 
Do you expect one every year?

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