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Did You Spend or Save Your Tax Return?

(posted: June 1st, 2017)

Spending Your Tax Refund
While we certainly don't want to tell you how to spend your money, we do have some suggestions on how to save it. Tax returns are a great time to take a look at your money, savings, and spending, and see what you can do to get ahead financially.

Every year almost 8 out of 10 Americans get a federal tax refund.

Now, we'll be the first to remind you that if you are receiving a refund, you are giving the government an interest-free loan of your hard-earned cash. But there are reasons you may be getting a good sized chunk of change back from the IRS.

So, how do you spend your tax refund?

If you use it to buy big-ticket items, you are not alone. But we'd like to jump in here and make a suggestion. It's not as exciting as a new TV or car, but it could make you a lot happier in the long run.

Instead of buying something that depreciates in value, use your tax refund to pad, or start, your emergency fund. Or to enrich a retirement account. Or split it between your child's college savings and and your house repair fund. Having three to six months worth of essential living expenses in liquid savings is a great emergency fund target. If you have your refund direct-deposited into your bank account and move the money immediately into savings you'll never even miss it.

If you've got a good savings cushion already in place, use your refund to pay down any debt you are carrying, starting with the account with the highest interest rate.

Or, if you really just want to have some fun, (and who doesnt'?), try using some of your refund for splurging and earmark the rest to improve your finances.

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