How Americans are Spending their Refund (and How You Should Spend Yours)

Tax refund burning a hole in your pocket? That isn’t a bad problem to have! But try to avoid the temptation to spring for a new flat screen TV or a mid-year vacation. While a tax refund can feel like “free money”, there are a lot of thoughtful ways to put the cash to work. In fact, according to Bankrate’s 2017 Money Pulse Survey, the “splurgers” are in the minority; only 6% of those surveyed intended to spend their refund frivolously.


With that in mind, here are a few refund deployment tips from our team

  1. Strengthen your Emergency Fund: Many experts suggest keeping anywhere between 3 and 9 months of expenses on hand in case of emergency/loss of income. Hide your refund away in a savings account for a rainy day.
  2. Pay Down Debt: If your emergency fund is in good shape, take a look at your liabilities. Making extra payments on a loan or credit card can shorten the term of the loan, save on interest expenses, and eventually reduce your monthly expenses. For more debt advice, check out this helpful post.
  3. Save for Retirement: Consider making an extra contribution to an IRA or employer sponsored retirement plan.* You’ll likely be able to deduct the amount on your 2017 tax return, defraying this year’s taxes while improving your net worth. The additional funds will contribute to long-term compound growth, potentially enjoying decades of tax-sheltered appreciation.
  4. Update your Estate Plan: A lot of my clients cite cost concerns when justifying procrastination on preparing a will. But everybody can benefit from some estate planning – no matter their age or level of wealth. Put this year’s refund towards the cost of a new (or updated) estate plan. You’ll enjoy the peace of mind.

*As always, be mindful of contribution limits and consult with your tax preparer before making additional retirement contributions.


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