Ding! Tax refund alert! If you are the average taxpayer, you’ll receive a boost in your return of $2,852 this year – at least, according to the most recent numbers from the Internal Revenue Service. What are you going to do with it? The usual suspects will be: splurge on new clothes or travel, buy groceries for a full month or more, and maybe even sock away some for a rainy day. But if you have more financial sense than the average American (aka any common sense at all), that check will probably go into an investment account or maybe you’ll use it to pay down debt.

As any financial pundit will tell you, you are supposed to pay off all your debts and set savings goals. But let’s face it, for a lot of us, that sounds like a diet of diabetes-inducing butterflies and sunshine. You’re making choices that you normally wouldn’t Controlling yourself is difficult. Alev says that for many people, that tax refund amounts to ‘the biggest windfall of the year’. Considering how many of us tend to spend like Naruto characters and splash the cash around like water, it’s no surprise that ‘one in four taxpayers treat their refunds as a blowout and view it as free money to spend on things they wouldn’t normally spend on’.

OK, life is pricey. Between ballooning expenses and interest rates that cannot print money like the Federal Reserve can, it’s easy to see why one might want to treat oneself. But before clicking ‘purchase’ on your latest electronic gadget, consider that your refund could be the difference between a bright future and a dim one without the benefit of more sustainable, long-term streams of passive income.

Turning Your Refund into a Runway to Financial Freedom

Let’s explore some options beyond the retail therapy route:

Debt Demolition Crew: With high-interest debt burdening you? It’s likely one of the most significant expenses you carry each month, and it deserves your attention. Use your refund to make a serious dent in all those outstanding balances – or even to pay off a car loan. Letting go of one payment can give you more cash flow each month.

Savings Supercharge: If you don’t have enough cash to reach your savings goal in one fell swoop, your tax refund can be a great starting point. Think of it as a head start — a beginning towards your emergency fund or the start of a down payment for a long-term goal.

Future-Processing with a Golden Handshake: While saving for retirement might not be as exciting as a new TV, we promise your future self will come through with gratitude.

Remember, every dollar saved is a dollar you don’t have to borrow later.

The Power of Planning: Make Your Refund Work for You

Regardless of what you make, there’s always a smart way to use your tax refund – here’s what you should do with your check.

Be honest with yourself: Honestly assess your financial health and priorities. Are you in a hole of debt? Do you have an adequate (bare-bones!) emergency fund? The more focused your goals, the bigger your bang will be.

Develop a Plan: Keep the money out of sight and out of mind. Decide how you’ll use your refund before it comes in. Ask about direct deposit to a separate savings account so you can avoid teasing yourself about the money.

The Little Chips: If the vastness of a big savings chunk is turning you off, think ‘little chip’. Just start chipping away with a mediocre amount, such as a few hundred dollars.

This year’s tax refund could be your spri

Your tax refund could be bigger this year. Here's what to do with it https://t.co/BKeZRIEfGr

— 9NEWS Denver (@9NEWS) May 10, 2024

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