FORUM Credit Union's website works best with JavaScript enabled

What should you do with your tax refund?

The IRS is estimating that over 100 million people will receive a tax refund in 2016 out of an estimated 150 million tax returns to be filed.  Chances are pretty high you will receive a tax refund so the next question is what will you do with it? 
What is the average amount of the expected refund this year?
Hoosiers who are getting a refund this year are expected to receive nearly $2,600 in tax refunds, slightly less than the national average of nearly $2,800. This is a significant windfall of money that will certainly be noticed when received.
How many options are there for using your tax refund?
When it comes down to it, we have three primary choices for using our tax refund.  Save it, use it to reduce debt or spend it. Of course, in each of these options are a myriad of options that can be chosen.  The key is finding the option that is best for your overall financial picture.
What would be reasons for saving a tax refund?
One great use of a tax refund is to build your emergency fund or even start it.  You could also use if for educational savings and finally, it could be a big boost to your retirement savings.  Any of these options would be a good choice, it just depends on where you are individually with all three of these saving activities.
If someone wants to pay off or down debt, what should be considered?
The first consideration is if you can pay off an entire credit card or loan.  If that isn’t possible, the next consideration might be applying the refund to the debt that can generate more monthly cash flow when it is paid off.
What would be good reasons to spend your tax refund?
If you have big purchases to make, such as a buying a car, paying for a wedding or making improvements to your house, these would all be a sound financial decision.  Basically anything that is a need is an okay reason to spend your tax refund.
What types of spending activities should we avoid?
Anything that is a want versus a need is probably going to be considered frivolous especially if you have debt to pay down, need to boost your savings or neglect important needs.  Examples might include gaming systems, big screen TVs, and unplanned vacations. 
What is the biggest trap people fall into when spending their tax refund?
Many plan to only spend their tax refund and yet end up spending a considerable amount more than their refund. So instead of getting out of debt, many people often spend double their refund and justify in that they really only had to finance 50% of the cost of whatever they are buying.
What advice would you give to a person who keeps getting a large refund year after year?
Consider making changes to your withholdings to that you get more of your money in your paycheck instead of letting the government keep it for free.  Save some of the extra take home pay and in the end, you probably won’t miss that large annual tax refund.

Posted: 3/10/2016 with 0 comments

Categories: Debt Reduction, Money Matters, Saving, Taxes

Blog post currently doesn't have any comments.
 Security code