The Real Deal on How We Spend Tax Refunds
It probably comes as no surprise that filing taxes is one of the least favorite items on everyone’s to-do list.
In fact, in a recent GoBank survey, the majority of Americans say paying Uncle Sam is about as enjoyable as a trip to the dentist or getting gum on their shoe.
But as it turns out, there is a light at the end of most taxpayers’ tunnels: Every year, nearly eight in 10 Americans receive a refund from the government—and so far for tax year 2014, the average refund is coming out to $3,120.
While you can argue that it’s wiser to minimize your refund so you have more money throughout the year to save and invest, the good news, at least, is that people see the extra funds as a way to get ahead on their financial goals and responsibilities—rather than spending it on unnecessary personal splurges.
According to a recent survey from the National Foundation for Credit Counseling, a whopping 68% of people say they would use a refund to pay down debt. Meanwhile, 15% say they would spend the money on basic necessities and 11% would use it to help grow their savings.
In comparison, just 2% of people would use their refund to go shopping or take a vacation. (4% didn’t know how they would spend it.)
And if you’re one of the many Americans just itching to get a head start on your financial goals using your refund, you probably won’t have to wait too long: More than 80% of respondents in the GoBank survey said they received their refund within a month of filing their taxes last year.
If you’re anticipating some money back from Uncle Sam, here’s one way to allocate your refund: put 90% toward your financial priorities—such as saving for retirement, beefing up your emergency fund and paying down debt—and then use the remaining 10% to have a little fun.