It’s that time of year again, Americans everywhere are getting ready to receive or have already received their tax returns. 62% of Americans receive a tax refund from the IRS or their state, and more than half have already planned how they’re going to use it.
According to Credit Karma most people will be putting money in a bank account or emergency fund at 20%. 18% of people will be using their tax refund to pay off credit card debt and 16% will be paying some other form of debt. 11% will be using their tax return to splurge on a vacation or travel. Many people are saving their refund for a major purchase like a house or a car at 10%. 6% will be spending their refund on themselves. 6% of people will use their extra money to pay off student loan debt and 3% will be paying off medical debt. 3% will put their money in a family member’s bank account, and 2% will spend their refund check on a significant other.
The vast majority of people will be using their money wisely. Using a tax refund for savings, an emergency fund, or to pay down debt is a great idea. According to Mint, there are many smarter ways to get the most out of your tax refund, and while none of them are quite as fun as a vacation, they will help better set you up for success. Paying down debt is one of the smartest ways to use a tax refund. You should start by paying off high interest debt or any past¬-dues, then moving to lower interest or less urgent debts. Building an emergency fund is also incredibly important, and easier to do with an extra influx of cash. It is recommended to have at least 3 months of living expenses stashed away for emergencies. You could also use your refund check to establish or add to your retirement account. It may not feel like much now, buy you’ll appreciate it when retirement comes around. You could also consider upping your insurances, home, car, or health later in the year. These could save you money in the long-run by covering you in case of disaster. Saving your tax return would also be a wise choice. Mint suggests opening a separate account just for savings when saving up for a major purchase. Last but not least, it could be a good decision to make some home improvements with your refund check. Any projects that have been put off that would increase your home value and make your home a more comfortable place to be would be a good investment.
There are many ways to spend the money you receive from your tax return, but remember, this influx of money isn’t just an extra cash bonus. You’ve earned the money and it was withheld from your pay, essentially making a tax refund like a paycheck. Just like a paycheck, it would be unwise to spend it all at one time or to fail to use it on something useful.
The author of this article can be reached via email at rhenderson@ troupcountynews. net.