How Would You Spend Your Tax Refund?

How Would You Spend Your Tax Refund?

Expecting to get a little jingle back in your pocket this year, courtesy of Uncle Sam?

If you're unsure, the answer very likely could be "yes," considering the majority of taxpayers received refunds last year: In 2016, 73% of tax returns filed resulted in money back, says the IRS.

With the odds on your side that you could score a lump sum in the next few months — if you haven't received it already — a bigger question remains: What would you do with a refund?

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According to a new survey by consumer finance site Bankrate, most filers who expect a refund intend to go the responsible route: 34% plan to save or invest the money; 29% will put it toward food, bills and other necessities; and 27% plan to pay down debt. Only 6% of respondents said they would spend the money on a big-ticket purchase like a car or tropical getaway.

Special shout-out to Millennials: While 66% of young adults said they've already received a refund or expect one to show up in their bank account soon, they’re also the generation that is most likely to save or invest it, Bankrate reports.

While it's great to hear that people are planning to play it smart with their mini windfalls (the average refund last year came out to $2,857, and the IRS expects that amount to be similar this year), it's OK to treat yourself a little bit. In fact, we here at LearnVest like the 90/10 rule, the general guideline that suggests you put 90% of any chunk of money you receive (like a tax refund or a bonus) toward your financial goals, while 10% can be set aside for a splurge.

For example, if you've got a lot of credit card debt you're trying to pay off, you could put all or most of your 90% toward paying that down if your debt has been weighing heavily on your mind. Or you could split it among multiple goals, like putting 30% toward an emergency fund, 30% into a retirement account and 30% toward paying down student loans.

The remaining 10% is the fun part — it's money you could use for your next weekend getaway, tech toy or fancy dinner out, so that you're still having fun without racking up debt.

However you decide to allocate your refund, we recommend that you don't just leave it in your checking account, because you'll likely end up spending it before you get a chance to put it toward any of your financial goals.

RELATED: The Jackpot Problem: A Wise Guide to Windfalls

This publication is not intended as legal or tax advice. Taxpayers should seek advice based on their particular circumstances from an independent tax advisor.

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