The Most Common Ways People Spend Their Tax Refund
So…you just got your tax return and now what? The big question is how to spend it, right? There is no other time of year when you get an extra lump sum in your bank account. In fact, the average person receives just under $3,000 from their tax refund each year. Deciding what to do with your return is difficult, complicated and sometimes even fun! You might be surprised at how careful the majority of people are with their precious refunds – this is likely because most people realize that their refund is actually their own money, which has been overpaid throughout the year in taxes.
We have compiled a list of the most common ways that people spend their tax refunds to give you some ideas…
1. Emergency fund: The most common use for a tax return is not to spend it at all. Many individuals each year put their return in their savings account. Putting money into an “emergency” fund is one of the most popular ways to use a refund.
2. Paying down debt: Many people choose to pay down their existing debt with their tax refund. Reducing the amount you pay each month to credit card debt (and high interest rates) is a common and wise thing to do with your “bonus” from Uncle Sam.
3. Everyday expenses: For many families who have been struggling with finances, their tax refund goes toward everyday expenses…groceries and other household necessities.
4. Special purchase: For another group of individuals, a tax refund is a way to make a special purchase for themselves or their family. A new TV, a car, furniture, exercise equipment and vacations are just a few of the special purchases made each year with tax refunds.
5. Invest in your own retirement: Did you know that you can contribute up to $5,500 each year to your retirement account through a Roth IRA and withdraw that money TAX FREE in retirement. That’s a fantastic return on investment!
6. Make an extra mortgage payment: Another great investment that you can pay down is your mortgage. Your home is one of your best and most important investments and paying down the principal by one additional payment will shave MONTHS or even YEARS off of your 30 year loan. You can also use your refund to pay down a home equity line of credit or for a much needed repair.
Partner with Success to increase your refund:
There are an unlimited number of other ways to spend your refund. A few additional options got our attention: you could pre-pay for your next vacation, take out a life insurance policy, contribute to your child’s college savings account, or a make a tax deductible charity contribution.
No matter what you decide to do with your refund, it is an excellent opportunity for you and your family to get ahead and do something positive for your financial situation, no matter how small. Maximizing your refund can make quite a difference in your financial outlook. If you are looking for ways to increase your refund next year, consider partnering with a tax firm that can get results.
Success Tax Relief has one of the strongest records in the country for advocating for our clients and increasing annual refunds. Contact us today – it’s never too early to start planning for next year!