Managing Your Tax Return

The first months of the new year always seems to be tighter on the purse strings as folks enjoyed the bounty of Wal-Mart and other shops a little too much during the holiday season. Gift giving season is over and the stockings were full, but now our coffers are empty as we struggle to pay off the cards we charged up, or fill back up the savings accounts that we dwindled at the end of the last year. Now is a good time to sit down and make a plan for your income tax return, if you are typically blessed with receiving one. It is also a good time to create a workable budget that you can stick with so that you don’t face the same tightening of the purse strings at this time next year.

Several years ago when my husband was stationed in South Carolina, I volunteered in a military relief society office on base that helped folks with budgets and emergency financial needs. The most common excuse I heard for financial woes was that the family didn’t make enough money to create a budget and that they lived payday to payday. I always told my clients that this was the time they needed a budget the most because every penny counted and they needed to know where all those pennies were going. It was through my experience of creating budgets for other people that my husband and I really began to work on staying on budget and saving for our own family. I figured if I was going to be telling people what to do with their own money, I better have my own finances in order as best as possible, too!

Because of homeschooling, and other activities as our children have gotten older, I no longer have the time to volunteer on base in a typical office setting, but I do still try to help young friends and family out with budgets and finances when asked. I find it a blessing to sit down with young nieces/nephews or teens especially, and show them how they can budget their small paychecks to make their money work for them. My husband and I are not perfect with our finances, of course, but we are pretty tight with what we spend our money on, try to pay for everything with cash, and have worked to create a bit of a retirement fund and college funds by creating a sound financial plan that works for our family. My husband will tell you that he doesn’t typically know what is in our bank account, but he will also tell you to ask me. I can almost always tell you within a penny or two what we have there. That is only possible because we use cash (or our bank check card) for everything now and we have created a budget that allocates all our money into specific categories.

Our biggest goal has been to teach our children how to be responsible with their money. It is a blessing to see our children put their tithe in the plate as it is passed on Sunday morning without having to be reminded. It is also a blessing to see our children make wise decisions when shopping. Our three sons are younger and don’t have their own “income” other than occasional small side jobs, such as leaf raking or dog walking, but our daughter just turned 17 and has been working for several months for a lady with whom we attend church.

Victoria’s position is most closely described as a personal assistant. She does a little bit of everything ranging from dusting and vacuuming, to creating wardrobes (my daughter loves fashion and can put together outfits like I only dream about), to paying bills, and writing notes. We have told Victoria that the money she earns is her own spending money, with the exception of her tithe, and that she can spend it on whatever she wants. However, we have also told her that she must pay for any youth trips that she wishes to attend, as well as pay for her own clothes, and drivers education classes. She now keeps a ledger of all her incoming and outgoing finances so that she can track what areas she is saving money for and in what category it falls, as well as all of her expenditures.

For example, she has chosen to spend a portion of her money on building up her hope chest with items that she would like in it but that are above mine and her dads price range. There is a specific vintage 50’s china pattern that she has fallen in love with, so she has allocated money for savings for that whenever she runs across the pattern online or in an antique shop. It is a very high cost purchase, but one that she is willing to save for because she knows she, and her future family, will enjoy it for a long time to come. It is a personal choice she has made.

Much like Victoria’s personal choice on vintage china purchases, your creation of a budget and use of your income tax return are personal choices. You have to choose what will work for your family. There are a few specific things our family always does at this time of year and I will give you a few examples of those. We always run a check of the 3 major credit report agencies at the beginning of each year to make sure our credit report is in order. Last year I found a late library book fee from several years ago for about $7.00 had been reported to one of the credit reporting agencies. I didn’t even know I had a late fee at that particular library because the date was from a time when we rarely visited the library. However, after some investigating, I found out I did in fact owe the fee. I paid it and was able to have them make the notation on my credit report. Most people don’t realize that places like libraries may report to a credit agency. Completing an annual check of your report will keep you on top of what is happening with your finances.

Another thing we always try to do is put aside a portion of the income tax return in an emergency account for travel. We have several elderly people in our family who have not been in the best of health. By having that emergency fund, we can travel home to be with family should a bad hospitalization or death occur. It isn’t necessarily a happy thing to think about setting money aside for deaths or hospitalizations, but it is a wise choice.

Next, if there is any large homeschooling purchase we need to make, such as high cost items like telescopes or microscopes, or instrument repairs that need to made, then we allocate money for that. For example, this year we plan to have a new set of keys installed in our 105 year old piano. The restoration of our old Bailey has not been a cheap process, or a fast one for that matter, but in the end we feel like it will be worth the cost. We also allocate funds into the children’s college accounts, our retirement account, a personal savings account, and pay off any debt we may have incurred throughout the past year, such as uniform purchases for my husband on his military exchange credit account.

There is one other thing my husband and I do first and foremost with our income tax return that is somewhat controversial among other people. We tithe off of it. I know many folks will say they tithe during the year off their gross pay, and therefore their income tax return has already been tithed off of but my husband and I look at it differently. Most of the time, our income tax return is only so large because of a child tax credit or earned income. That is not income that we have previously tithed off of, but instead it is “free” government money. That is why we tithe off of it as well. Again, that is a personal choice as a Christian family we have made to tithe the 10% from the top, but you have to choose for your own family what you should do.

I have tried to stay away from telling you what percentages you need to put in this or that category, with your budgets and your use of tax returns. I’ve found most often organizations like Crown Financial Ministries or Dave Ramsey are good starting points for teaching you, but each family has its own unique dynamics and needs that no set program will work the same for. Each one has to be tweaked, if you will. I hope that by sharing a bit of what we do with our family it has encouraged you to at least create a budget that will work for you as well as plan where your money will go. If you start with those two simple steps, you will be making worthwhile strides in putting your finances in order throughout this upcoming year.

Sallie Anderson is an off-again, on-again homeschooling mom to her 4 children, ranging from elementary to high school. In her writings, she discusses the challenges of homeschooling a child with disabilities and offers insight to those who sometimes feel all alone, like a square in a round world. Please visit her at Seaside Tales.

Tags: banking, budgeting, credit reports, finances, financial goals, financial hardship, financial responsibility, making a workable budget, money management, paying bills, planning your pennies, spending, tax return, teaching money management

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