Would You Buy A New iMac 24″ or Fund Your Emergency Savings Account With Your Tax Return?

by Scott on February 12, 2009

get your taxes done
photo credit: Paul Keleher

You just received your 2008 tax refund, do you have an eye on the new 24″ iMac or will you put it towards your emergency savings account? Will you use the tax refund to pay off credit cards, save for a vacation, or maybe start investing in the stock market? I wonder if the current economic recession will cause people to set money aside for a rainy day or start an emergency savings account that can pay for car repairs or doctor bills. Maybe you will use the tax return to fund your child’s 529 college savings account this year. Here are several changes my family is making in 2009 with our tax refund:

1. Change tax withholding amount.
We have received a refund for the past two years and we need to adjust our return so that we don’t continue loaning the government “free” money.

2. Add funds to our emergency savings account.
Our goal is to have 1-2 years of savings in our ING Orange account for emergencies in case we lost our jobs for an extended period of time.

3. Add additional funds to college 529 plans.
We chose Vanguard for our 529 college education plan as they have low fees, great funds, and an easy to use website. Since our children are young they can benefit from the current prices of S&P 500 stocks.

What is tempting to do with our money:

1. Buy a new imac 24″ computer for my home office. Yes, I love macs and have had my eye on the new imac for several months. I’ve visited our Mac store several times and asked dozens of questions, and I think I’ve impressed my wife that I still didn’t buy one. My plan is to convert my Powerbook into a desktop by finding a separate LCD monitor and external mouse. Total savings $2,000

2. Buy a new vehicle. It’s tempting to upgrade to another SUV or minivan that would give our family some more legroom, but it just doesn’t make financial sense right now. Many of our friends swear by the Toyota Sienna, but we have yet to make the purchase. Our vehicles run great and they both have over 100,000 miles, but are both paid off. It’s hard to make another car payment just for a little extra leg room.

3. Buy a new refrigerator. Kind of strange that I would even put this down as one of the things I would buy with our tax return, but our fridge is driving me crazy. Each time a guest comes over to our house, they say that it’s annoying to open up. When we bought our first home our GE refrigerator fit perfect, and in our current home it’s not a counter depth model. It sticks out a good 4″ and the right door hits our kitchen door each time you open it. Very annoying, but our refrigerator works fine. How can I justify spending $800+ for a new one?

So how will you be using your 2008 tax refund? Emergency savings account or 24″ iMac?

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{ 39 comments… read them below or add one }

1 The Dividend Guy February 12, 2009 at 3:00 am

Personally, I’d go for the Macbook Pro. However that is what I would like to do. What I actually would do would be to fund that emergency fund. I really like the idea of changing your withholding amount – a refund is only money you loaned to the government! It always was your money.

2 Nicki at Domestic Cents February 12, 2009 at 5:35 am

Yeah I’m more the practical girl too. My husband works out of state so we usually get a small refund from our federal return but end up owing the other state. We pay what we owe out of the refund and then use the rest to pay down debt. But yes … would be nice to splurge :-)

3 Miranda February 12, 2009 at 7:08 am

We bought a new Mac last summer — when the new line comes in, we buy the closeouts that didn’t sell from the line before. It works wonders, and I get a tax benefit, since its for my home business.

That said, we won’t be getting a tax refund. I pay quarterly for my business, and I’ll be happy if I don’t owe — since I made a little more this year.

4 Jeff@StretchyDollar February 12, 2009 at 8:18 am

Man – I was all set to through that all into our ING account and then I read about the Mac. Now it’s going to be hard to keep focused. I’ll just sit here for a couple minutes thinking about 24 inches of goodness….

5 Steph February 12, 2009 at 9:14 am

We actually are getting a good sized tax return this year – thanks to the government not counting exemptions on severence pay taxes. It will be going to replenish our emergency fund.

6 (F)reddy February 12, 2009 at 9:59 am

While I’m getting back more than I made in the first year I started working (in high school, of course!) if by “splurge” you mean pay off credit card debt, then yes…I’m splurging. Pay off the credit card JUST IN TIME for our spring break family vacation!!! WOOT!

7 Phoebe @ Cents to Get Debt Free February 12, 2009 at 10:00 am

We are going to buy new to us furniture, some into savings for those unexpected expenses that seem to crop up during the year. This year I want to be ready for them so that it doesn’t throw us all off when they do get here.

And then the majority is going to go towards our debt. Doing so should help us well along our way to debt freedom by 2010.

And, you mentioned that you wanted to change your withholding amount so that you aren’t loaning the gov’t money. I fully agree with you, but hubby made a point the other day and said that he would rather not because you never know when they will change the tax laws, and we could end up owing.

What is your take on that?


8 Scott February 12, 2009 at 10:13 am

@ Jeff

I know, I can’t stop thinking about the new imac either. I should be content with my Powerbook for now. It’s really tough though :)

9 Scott February 12, 2009 at 10:15 am

@ Steph

Interesting that the government wouldn’t calculate severance correctly. It’s unfortunate you had to go through a severance situation at work, but a blessing to receive an extra amount in your return. I hope it all works out for you.

10 Scott February 12, 2009 at 10:29 am

@ Phoebe

Even with rates at only 2.2% on our ING Orange account, we are losing this amount by giving the government a free loan on our money each year. I would agree that if your tax refund is close to zero, you might not want to change your withholding amount, but our was a couple thousand. Even if tax laws changed considerably, we will have the money in our ING Orange account to pay the taxes. You are correct as we don’t know what changes will occur to 2009 tax laws, but I would rather be in control of our money. The state of California is an excellent example where we have no control over our own money. We are due money, but will receive an IOU from the state instead.

11 Scott February 12, 2009 at 10:38 am

@ Miranda

Finally, a ray of hope for my new imac :) Now I just need to start a business and I can write-off the new imac purchase :) It would help if I also had some income to pay for it though. I like your thinking and should make it a goal to find a business to make at least $2,700 by years end. Tax write-off are great.

12 Scott February 12, 2009 at 10:47 am

@ Nicki

It would be nice to splurge, but paying taxes has to come first unfortunately. You could start a business as Miranda @ Yielding Wealth has done to create some tax breaks.

13 Scott February 12, 2009 at 10:50 am

@ The Dividend Guy

We are changing our withholding amount today and hope it kicks in the next pay period. The upside to a tax return is that I can increase our budget and savings goal for the year. Funding that emergency account and putting some money towards college 529 plan is our first goal.

14 FFB February 12, 2009 at 11:52 am

Our refund will do the same thing as last year’s – deposit directly into my ING Direct savings!

I bought a MacBook in November. Got a refurb model so I got more bang for the buck. As I use it for my site I was able to write it off against income so in a sense it ended up costing even less.

15 Scott February 12, 2009 at 11:55 am


A new macbook and a tax deduction too. Sounds like a great idea.

16 Kelly February 12, 2009 at 12:16 pm

We already got ours and used every cent to pay off debt.

We already have 3 Macs (13″ unibody Macbook, 20″ IMac, and MacBook Pro).

My splurge would be a new fridge too! To replace the one that is here which is from 1990!!

17 Scott February 12, 2009 at 12:26 pm

@ Kelly

Sounds like you are a mac family. You forgot to mention ipods or iphones :) I think my wife would vote for a new fridge before we get another mac too.

18 John February 12, 2009 at 12:43 pm

I am getting a whopping $250 back. That is because I changed my withholdings so they take out less during the year. I figured I need the extra money in my paychecks rather than get a lump sum and probably waste it somewhere!

I used the IRS calculator on their website and the Turbo Tax calculator to determine my with holdings and they were pretty dead on.

19 Scott February 12, 2009 at 12:48 pm

@ John

Smart move. $250 is a great goal and I think you are on top of your tax withholding calculations.

20 Emily@remodelingthislife February 12, 2009 at 2:07 pm

we’ve already stashed ours in savings. we’re so boring.

21 getting my act together February 12, 2009 at 2:58 pm

we are getting 3,500 back. 638 are going to pay off our last credit card woohoo! and the rest goes to pad our e-fund. we might use a small portion later this year to replace some curtains around the house but in the meantime it will sit @ ING.

22 TheNightTrader February 12, 2009 at 2:59 pm

I just bought a closeout MacBook Pro shortly before Christmas with my “extra” paycheck, so I’m good there … for a while …

The normal refund we get will be going straight to the emergency fund :-) . But, we will be closing on a new house tomorrow, so I’m planning on snagging that tax “credit” this year (or whatever they actually decide to do). That money will go to a separate checking account and be used to pay for landscaping and starting to finish out the basement.

23 Greener Pastures February 12, 2009 at 3:37 pm

That’s the great part about tax season. The return! I’m thinking I’ll just sock it away until something comes up. Nothing big I’m desperate for right now. And we should really make our emergency fund a bit bigger.

We need to have some painting done inside the house. We go back and forth on whether or not we should do it ourselves. There’s a fair amount of wall repair that needs to be done. We don’t know as much about those sorts of repairs. If we do anything it will be this, I think.

24 Scott February 12, 2009 at 4:47 pm

@ Greener Pastures

You should try to paint yourselves and save some money. I’m also a fan of having a work party and get friends to come over and help paint. My buddies and I trade-off and help each other do projects on our homes. It does save a ton of money and it can be fun to work together.

25 Scott February 12, 2009 at 4:51 pm

@ The Night Trader

I’m curious if the new legislation will be for a primary residence to qualify for the tax credit of $15,000 or if it also extends to investment properties. I can’t imagine the tax credit being implemented if we purchased an investment condo that costs $75k. I’m sure some restrictions will be implemented and it won’t be as easy to apply for the credit as it appears in the media. I wish you well in your new home.

26 Scott February 12, 2009 at 4:54 pm

@ Getting My Act Together

$3500 is a nice tax return. Congratulations on the huge accomplishment. You should feel wonderful that you have paid off your last credit card and are now debt free from high interest rates.

27 Scott February 12, 2009 at 4:57 pm

@ Emily

Putting money towards savings isn’t boring. If you consider the Millionaire next door boring as they tend to pay themselves first and save 15%-20% each pay period. You should feel ecstatic that you don’t have any wants or needs right now and can put the entire tax refund toward savings.

28 asithi February 12, 2009 at 4:59 pm

I can understand the refrigerator lust. I have the same problem. My husband always want a side by side door refrigerator and I wanted one with dutch doors. Needless to say, he won that argument a few years, but has now come to see why a dutch door refrigerator is more practical. But since ours works prefectly fine, it is hard to justify getting a new one. But everytime we come home from our friends house who have a dutch door refrigerator, the refrigerator lust starts all over again. This sounds bad, but I hoping that our refrigerator might break down on us around the next tax season. :D

29 Scott February 12, 2009 at 5:08 pm

@ Asithi

I’m right with you on this one. Once our water dispenser started to act up and I was secretly hoping that the entire fridge would die. Nope, it’s going strong and not an issue for 6 years. The one we want costs $1,500 and so it goes to the end of our wants list.

30 Monroe on a Budget February 12, 2009 at 8:14 pm

DH says he’d like the iMac.

But for all practical purposes the tax refund will pay some bills / emergency fund.

31 Boomer February 12, 2009 at 8:27 pm

We’ll accelerate our debt payoff.

We haven’t computed our taxes yet but I expect a healthy refund, thanks to spending $10k for a remodel of our rental property.

Still….I’m as excited to get rid of debt as I would anticipating a really cool purchase. Kinda weird in a gratifying sorta way!

32 Scott February 12, 2009 at 8:39 pm

@ Monroe

I’m with your DH on this one too :) But, the imac will have to wait a few more months until blog income increases.

33 Scott February 12, 2009 at 8:40 pm

@ Boomer

I like the way you think about debt. Glad to see you get fired up about saving money too.

34 Ron@TheWisdomJournal February 13, 2009 at 8:16 am

We’re using ours to do three things:
1. Pay a few small remaining debts from the ice storm that hit on Jan 27.
2. Pay a couple of thousand on my daughter’s braces.
3. Rebuild our emergency fund after having $10,037 in medical expenses last year. Last year was a rough one on the healthcare front for us.

35 Scott February 13, 2009 at 9:48 am

@ Ron

That ice storm was unbelievable. I hope you’re back in your home now and rebuilding the damaged roof. I’m afraid to ask, but what do braces run for teenagers? I’m sure it varies, but I never needed braces as a kid and don’t know what to expect. I guess I’d better start putting some money away for our kids dental fund. Maybe the tooth fairy should just offer direct deposit to this fund :)

36 pete February 16, 2009 at 7:57 am

I’ve already received my refund and was hoping to buy a new iMac, but justifying that much money was impossible. I did get a computer, but it was much cheaper than the iMac. Windows, yes, but a top-end quad core for a third the price.

37 Scott February 16, 2009 at 11:32 am

@ Pete

Yes, it’s hard to justify the price of a new imac. I still want one though :)

38 Single Guy Money February 17, 2009 at 6:03 pm

If you have a perfectly good computer right now, my vote is for the Emergency Savings Account!!!!

39 Kelly February 17, 2009 at 7:47 pm

You may want to change your withholding so you get your money this year instead of Uncle Sam.

You can run a W4 calculator to help you figure out what your deductions should look like.

I’d rather have a few hundred a month than a big, fat return personally. :)

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