SACRAMENTO, Calif. — This week marked the deadline to file taxes, and many people have started to get their tax refunds. It’s a nice cash boost and spending it may be tempting, but an expert says there are other ways to get satisfaction from that windfall.
The latest numbers from the IRS show the average individual amount refunded is more than $3,000, up slightly from last year.
“You have to take some time to really investigate what you want after receiving the tax refund,” said financial coach Maureen Paley.
A big screen TV? A designer handbag? Maybe a down payment on a new car? Paley suggests using the chunk of change to build your wealth.
“...Which really means paying down debt, saving or investing," she said. "You can put something at work today for a longer-term impact."
Paley says whether you want to spend your refund, save it or use it to pay off debt — be intentional and have a plan.
“When we don’t have a plan for what we’re going to do with the refund, it’s like ‘poof,’ it disappears,” she said.
So if you want to use your refund to pay off debt, focus on paying off high interest credits cards first. Remember, a tax refund is not a gift. It’s money you’ve already earned.
“It’s really the money that you earned is actually coming back to you and being held by the federal government for a little while,” said Paley.
Another suggestion is using the refund to start an emergency fund. Experts recommend an amount that would cover your expenses for at least 3-6 months.
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