Tax season is upon us, and the average taxpayer is receiving a refund of $2,852 this year, $75 more than last year. Experts advise putting this extra money towards debt and savings to advance financial goals. However, many people see their tax refund as a windfall and tend to splurge with it. Courtney Alev, a consumer financial advocate, emphasizes the importance of using the refund to improve financial stability, especially with the rising cost of living and high interest rates.
Some taxpayers like Emily Garcia from Ohio and Megan McClelland from California are using their refunds to indulge in purchases they wouldn’t normally make. Garcia and her husband opted to spend their $1,000 refund on patio furniture to spruce up their backyard, while McClelland is planning to allocate her just over $1,000 refund towards travel for upcoming events. Having recently paid off her student loans, McClelland sees the refund as an opportunity to enjoy experiences without going into debt.
While it may be tempting to spend the tax refund on fun or unnecessary purchases, experts recommend focusing on reducing debt and building savings. Matt Schulz, chief credit analyst at LendingTree, suggests that it’s crucial to do both simultaneously to break the cycle of debt. By having some savings in place, individuals can avoid relying on credit cards for emergency expenses and work towards financial stability. Alev stresses the importance of using tax refunds as a tool to get one’s financial life on track.
As of late last month, approximately 141 million returns have been processed by the IRS, resulting in refunds totaling around $261 billion, a 2.2% increase from the previous year. People like Emily Garcia and Megan McClelland are examples of taxpayers making personal choices with their refunds, whether it’s purchasing furniture or funding travel experiences. Ultimately, financial experts advise using tax refunds responsibly to improve overall financial well-being and avoid falling into the trap of unnecessary debt.
The goal is to break free from financial constraints and achieve financial freedom by making wise decisions with tax refunds. By balancing debt repayment and savings, individuals can set themselves up for a more stable future. While it’s tempting to splurge with extra money, the long-term benefits of using tax refunds wisely far outweigh short-term indulgences. As tax season continues, taxpayers are encouraged to make informed choices that align with their financial goals and aspirations.
