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How I Spent My Tax Refund

I finally did my taxes.  Some people dread tax time.  Others look forward to it.  I hate the processing of filing my taxes, but I always look forward to getting a tax return.  In my opinion, the higher the Refund the better.  I know, I know, getting a big refund means that I lent the Government money at 0% interest rate over the previous year.  Moreover, had I taken that money and invested it, I could have been much better.  Indeed, I just provided my monthly Dividend Income Report for March 2018.  Had I invested that money, my dividends and forward annual dividends in that report would have been higher.  However, I would rather be in the position of getting a refund than paying money.  Thankfully, I’ve always gotten a refund and I hope that trend continues in the future.  But, that’s then, and this is now.  Let’s talk about what I did with my Tax Refund.

Size Of Tax Refund

This year, I received the biggest refund I have ever gotten.  The IRS gave me back $5550.  I was super excited.  It goes to show you the benefit of real estate investing. That’s one of the major differences about my tax return than in previous years.  I’m not sure what future years will bring, but with that kind of money, I wanted to make sure I put it to good use.

Because I still have debt, that recurring question about whether I should pay down debt or invest keeps coming up.  I got tired of going back and forth on that, so this year, I made a resolution to pay off my student loan.  But my financial plan for the year did not take into account the huge size of my tax refund.

How I Spent My Tax Refund

Rather than take an all or nothing approach, I decided to spread out my tax refund across my financial life.  Hopefully, one day when I completely eliminate debt, I won’t have to worry about deciding between investing or paying off debt.  At that point, all my funds can go towards investing and building wealth.  But, alas, that day has not yet arrived.  So, here is what I did with my tax refund.

1.  Paid Off Credit Card Balance – $500

As discussed in my most recent Dividend Income Report, I was using my credit card for everyday expenses.  So, by the end of March, I had around $500 in credit card debt. I like to maintain a $0 balance on my credit card because it helps to maintain my excellent credit score.  So, the first thing I did was bring my balance back down to zero.  I really hated doing this.  I wish I never had such a huge balance on my credit card, but it is what it is.

2.  Rebuild My Emergency Fund – $1500

Prior to getting my refund, I depleted my emergency fund to about $20.  The sad thing is that I didn’t use my emergency fund for emergencies.  That is, unless you call going to the bar or eating out every day an emergency.  But, thanks to the IRS, my starter emergency fund is back to a healthy $1500.

It’s certainly possible, or even probable, that the reason I spent so much money in March is because I knew I was going to be getting a huge tax return.  I actually did my return earlier, but didn’t file it because Acorns didn’t release their info until March 15.  So, I had to wait at least until then.  It turned out that I didn’t even get any paperwork from Acorns because I didn’t make enough last year.  Believe it or not, I’m thinking about getting rid of Acorns for the simple fact that I don’t want to have to wait so late to file my taxes.  Probably not the best reason to stop using Acorns, but also probably not the worst either.

3.  Pay Down Student Loan Debt – $1100

I can’t wait to get rid of my student loans.  They aren’t costing me a lot financially.  After all, the interest rate is 2.625% and the monthly payment is $97.61.  However, I really hate it when I get extra money and have to decide if I want to pay down my student loan or invest.  So, I figure that once it’s gone, I really won’t have that dilemma anymore.

In accordance with my financial plan, I plan on paying $2000 towards my student loans every month.  However, in March, I was only able to pay $850 in addition to the minimum payment of $97.61.  So that left me short about $1100.  I used $1100 of my tax refund to make up the difference.  So, the grand total payment in March was $2047.61.  This will keep me on pace to paying off my student loans by the end of October.

The Debt Tracker has been updated accordingly.

4.  Save For A Vacation – $1250

I plan on taking a vacation in June.  I have never been to Spain, and want to visit Barcelona.  The last time I took a trip to Europe, I spent a small fortune and put it all on the credit card.  I was paying for that vacation months after it ended.  I don’t want to do that again.  So, this time, I figure I would do the prudent thing and put money aside before hand.  Despite what might appear to be my lavish spending habits, I’m really quite cheap.  Even if the overall trip costs a few hundred dollars more, I’ll be in a position to finance the whole trip with cash.  Moreover, since I’m already overseas, it won’t be as expensive as if I was traveling to Spain from the United States.

I’m really looking forward to enjoying Spain, assuming that’s where I decide to go.  I’ve already been to Paris and England.  Switzerland is a possibility.  I just can’t decide.  Decisions, decisions.

5.  Purchase Additional Shares In Emerson Electric – $700

On January 20, 2018, I announced that I recently bought EMR shares.  At the time, I purchased $250 worth of EMR for about 3.2 shares.  With my tax refund, I wanted to build my position in EMR.  So, I added $700 worth of EMR shares.

EMR is a free DRIP with Computershare, so the purchase didn’t go through right away.  I have to wait until Computershare makes a batch purchase, but I’m completely fine with that.  I’m invested for the long term so the short term fluctuations of the market doesn’t phase me one bit.

6.  Bought Two New Stocks – $500

As you may know, I’ve been uneasy about the upcoming transition of Capital One Investing to E*trade.  Most of my holdings are at Capital One Investing.  I won’t go into it again here, but sufficed to say, I’ve been looking for an alternative brokerage in case E*Trade doesn’t offer the same pricing options as I have with Capital One Investing.  I think I found what appears to be an almost perfect solution with M1 Finance, which I detailed in my post entitled, M1 Finance For Dividend Investing.

So, I wanted to give M1 Finance a try, but wasn’t quite ready to transition from Capital One Investing just yet.  I’m waiting for the acquisition to take effect before I decide to make the switch.  But, M1 Finance was too intriguing.  I decided to add two more stocks to my dividend portfolio.  Unlike any minor holdings I have in Robinhood, these two stocks will be tracked on this blog.

With my tax refund, I purchased shares in Kimberly Clark and McDonalds.  These two stocks make up my pie which I called Dividend Freedom Fund.  They are evenly weighted, which the program will automatically do with each contribution.  I was sure I wanted to add Kimberly Clark but couldn’t decide between Verizon and McDonalds.  I’m sure I’ll be adding Verizon to my portfolio in the future.  Also, eventually, I might move my entire holding from Capital One Investing and/or E*Trade to M1 Finance.

Finally, I’ve committed to contributing $200 to my Dividend Freedom Fund, which is separate from the $1010 that I already contribute to my dividend portfolio.  So, this brings my total contribution to my dividend portfolio to $1210 per month.

How I Didn’t Spend My Tax Refund

One of the things I was seriously considering doing was saving most of my tax refund to purchase a new car.  I’m going to need a car beginning this summer and that $5000 would have gone a long way.  I do expect to have access to about $10000 later in the year, and so one option would be to finance a car with the expectation that I would pay it off by year’s end, or within a year.  I’m not sure.

The reason I didn’t want to just save the $5000 is because I know myself.  Much like what I did in March, I would probably justify spending the money little by little until it was gone.  So, rather than risk wasting the money, I figure I would put it to good use, as I did above, and then deal with the car situation when it arises.  I do know it’s good to plan ahead.  Obviously, I realize I’m going to need a car, but I fully expect to be able to deal with that circumstance when the time comes.

The other thing I could have done was save the tax refund to cover any possible vacancies in my rental property.  My tenant’s lease is up in September and I’m not sure yet if there will be a vacancy.  But I didn’t save the money to cover such vacancy for the same reason why I didn’t save it to buy a car.  Besides, worst case scenario, I should be able to cover any vacancy with my regular paycheck.


There you have it.  I got the biggest tax refund I’ve ever gotten and that gave me options to do several things with the money.  Rather than choosing to pay off debt or invest, I decided to do a little bit of both.  Who says it has to be all or nothing?

What do you think?  What would you have done with the tax refund?  Did you get a tax refund this year?  If so, what are you planning on doing with yours?

Let me know your thoughts by commenting below.

The post How I Spent My Tax Refund appeared first on Dividend Portfolio.

This post first appeared on Dividend Portfolio, please read the originial post: here

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How I Spent My Tax Refund


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