The Coupon Lady: What to do with your tax refund

This year I procrastinated and waited until the last week to get my taxes done and was surprised to learn we would be getting a refund. We don’t usually get a big refund, but our sudden move and renovation of our old home last year helped us more than we realized.


Financial experts such as Suze Orman and Dave Ramsey are against people getting refunds from the government at all and want you to only pay exactly what you owe each year in order to avoid giving the government a free loan.

If you aren’t expecting a refund this year, you are not alone. An American Express survey of roughly 1,500 adults found that 59 percent of respondents said they expect a refund check this year, down from 64 percent last year. At the same time, 19 percent expect to owe money come tax time, compared to just 13 percent in 2012.

Of those expecting a refund, 37 percent plan to use it to pay down debt or bills, while 26 percent plan to save the money. Only 28 percent said they expect to spend their refund check on themselves or family, travel, home improvements or a big-ticket item.

So, what are some smart things to do with a tax refund?

First of all, you can use it to set up an emergency savings fund. Most financial experts suggest an emergency fund of at least six months of your expenses, but you can start with a smaller emergency fund if you are paying off debt. Ramsey, a radio talk show host and author, suggests a starter emergency fund of $1,000 during debt repayment.

If you choose to pay off debt, you have two options: You can either pay on the debt with the highest interest rate or pay off the debts with the smallest balances.

When my husband and I first got on a budget, we used our tax return on our emergency fund. Later on, as we had kids, we put any refund in savings in order to have our family’s medical deductible on hand when needed. Since we have ongoing medical issues, we count that money separately from our emergency fund since we know we will need it during the year.

If you have your debt under control, you can use your windfall to lessen your monthly expenses. Here are a few suggestions:

• Internet TV boxes allow you to watch TV and movies via the Internet without having to connect your computer to the television as long as you have a wireless Internet connection.

The most popular brands of Internet TV boxes are Roku, Orb, Boxee Box, Google TV and the newly released Apple TV. These boxes allow you to drop cable by using Hulu Plus and Netflix. Both services together costs around $16 a month and the box itself can usually be bought for less than $100.

• If you want to reduce your cell phone costs, consider switching to a pay-as-you-go plan, but do your homework. Find a pay-as-you-go service that uses the towers of the carrier that works best in your area. In our rural areas here, service can be tricky.

The basic limited family plan of the name brand service in my area is $90, but my pay as you go Android smartphone uses the same towers and costs about $46 a month for unlimited talk, text and data.

• To conserve energy, you can purchase a programmable thermostat for your home.

According to Consumer Reports, having a programmable thermostat can save you about $180 a year on your heating and cooling bill. Depending on the features, a thermostat will cost between $40-$150.

• Another way to save money in the home is to switch to LED lighting. LED lighting options have been coming down in price recently, and basic LED bulbs are now less than $15 each.