40% of Americans receive an income tax refund. When this group receives their refund, there is a corresponding jump in consumer spending that retailers expect. You may even hear tax-refund commercials from car dealers and appliance stores trying to get their share of this money.
No one should need reminding that receiving an income tax refund means you gave an interest-free loan to the government for over a year. It is better to adjust your paycheck withholding or reduce your estimated payments to get closer to zero income tax refund. But some people are unable to manage their money, let alone save, so an annual check in the form of a tax refund is their mechanism to get access to a chunk of money. This is poor method to manage your money. People that I know who do this rarely spend their refund in a productive manner. Learn to manage your money, gain the discipline for regular saving, and control your money instead of lending it to the government for free every year.
The National Retail Federation survey for 2017 found that the average expected refund is a little over $2,000. Where are they planning to spend this year’s tax refund?
- 48% Savings
- 36% Pay Down Debt
- 21% Everyday expenses
- 11% Vacation
- 9% Major Purchase (car, TV, furniture, etc.)
- 8% Splurge Purchase (spa, apparel, dining out)
- 4% Other
Thankfully, the first two categories, accounting for over 80% of respondents, were doing something with their money to get ahead financially – saving it or paying down debt. Where is your income tax refund going?