Whether it’s a deposit into your bank account or a physical check that you receive in the mail, it’s nice to collect a refund from the IRS. In 2016, there were 40 million tax refunds and the average amount was $3,120.1
When you’re fortunate enough to receive a sudden payment from the US Treasury, it can be tempting to spend it on a fun, luxury item. However, the other way of seeing a refund is that you overpaid taxes, giving Uncle Sam an interest-free loan. Since you earned every penny of your tax refund, think about doing something beneficial with that “extra” money.
If you’re wondering what to do with your tax refund, here are five smart things to do.
Now that you have a few ideas about what you can do with that tax refund, let’s remember one thing. A refund on your taxes is not the same as finding money. It’s money that you saved up without making any interest. If you’re an employee, consider asking your payroll department at work whether you could reduce the tax withholding each check, and if you’re self-employed, reduce your quarterly payments a little.
In the meantime, try not to spend this year’s refund on things you don’t need. Instead, use it to fund your future financial security and success.
1 “Tax Refunds Reach Almost $125 Billion Mark, IRS.gov Available for Tax Help,” IRS.gov, Feb.6, 2015 .https://www.irs.gov/uac/newsroom/tax-refunds-reach-almost-125-billion-mark-irs-gov-available-for-tax-help
2. Megan Elliot, “5 Ways Americans Will Spend Their Tax Refunds in 2016http://www.cheatsheet.com/money-career/5-ways-americans-will-spend-their-tax-refunds.html/?a=viewall
5. Fred O. Williams, “Measuring Averge Credit Card Debt,” Creditcards.com. Dec.17, 2015 http://www.creditcards.com/credit-card-news/average-credit-card-debt.php