This year our taxes went extremely well. Every part of the process was, dare I say, enjoyable.
We found a new tax accountant. The most incredible thing was, she did our taxes while we were there. Normally as a small business it can take weeks to have my taxes completed. She actually did them while we were sitting there so I could ask questions, and note when she missed a deduction.
In the end, she told us we were receiving about $8,000 back. As a small business, we pay estimated taxes based on the previous year, and since we didn’t make as much last year, we paid in more than we needed to. We also had a new baby girl last year which helped.
In the end, our tax accountant called us back and said she had missed another deduction. She asked me if I was sitting down… we were actually getting a little over $10,000 back.
So what did we do with $10,000?
First – We imagined the possibilities. I let my imagination run wild with Disney Cruises, and a new car. We thought about finishing the basement and the attic. We imagined investing all of it. Or giving it to charity. Or bulking up our emergency fund. Or buying gutters.
Second – We did some research. How much would each of these cost? We priced out finishing the attic and basement. We priced out Disney Cruises. I looked at investments. This was the only way we could compare the value of what we were getting.
Third – We re-figured out our own finances. Since we are self employed we only know what the next 4-6 months will bring income wise. That is why we have 5 month emergency fund. I looked through all of the work we had for the summer which is our best time of year. We were doing well. The problem we usually have is that the summer income has to be so great that it can supplement our winters.
Fourth – We thought about how we would feel in 6 months. If we took a $5,000 Disney cruise, how would I feel a few months later? Would having an attic in the office really help our daily lives? How great would we feel with a new car in the driveway?
Finally! We made our decision. Here is the breakdown:
Attic Finished into a library/office – $1,500
Business Expenses – $2,000
Emergency Fund – $4,000
Monthly Fund – $2,500
Why those items?
We decided to finish the attic since it needed minimal work, and because that would change our lives daily. With more room to work and a place to have all of our books and equipment, we would have a more enjoyable work day. I think investing in our office will have a huge return on investment since our current office is cramped and hard to work in.
My husband and I each received $1,000 each for our businesses. When you have a business there is always more than you want to invest into it. Usually, we reinvest some, but recently we have been wanting to be able to invest more. Even if we were given $1,000 fr personal use, I think we would have spent it on business items anyway!
We bulked up our emergency fund to a full 6 months worth of income. This helps us feel better about the winter situation and we have at least a year ahead even if we only had the work in front of us. Stability is a great friend!
Our monthly fund is what we use for our expenses each month. We have been wanting to increase our grocery budget to allow for more organics and fresh fruits each week. We increased our grocery budget. We are also going to get the gutters installed. All sorts of small things that don’t sound very exciting! It also pads the summer income so we have more when winter rolls around.
It’s really fun to dream, but in reality, most of the things I would be happy about in six months were things that improved my daily life. I love vacations and we are still talking about going on one with the children very soon, but I like things that are tangible much more.
I think we had to go through this process in order to figure out what we wanted. Since a Disney Cruise was the first exciting idea we had, I could have taken the check and paid for one. But taking my time to figure out exactly what the cost/benefit for each item helped me realize what I truly wanted, and so in six months I won’t regret spending any of the money.
For me, it’s about making a decision both logically and with my heart so that even if everything goes wrong (ie the attic is too hot, or a pain, or whatever!) at least I know I made the right decision with the information I had.