Your Tax Return – Save it or spend it? That is the question!
According to the IRS, tax refunds are up 0.7% from last year, and the average tax return this year is $3,068, compared to $3,046 in 2018. This may seem like cause for celebration, but that money was yours to begin with. You gave the government an interest free loan! A tax refund is not a free financial windfall. It’s money you earned. You wouldn’t thoughtlessly spend $3,000 from your regular paycheck – would you?
Every year, the same advice circulates about what to do with your tax refund: save for retirement, start an emergency fund, pay down debt, etc. What do most Americans do? 27% of taxpayers seem to pay down debt, while 19% say they plan to spend their refund either on a major purchase or vacation. But everybody’s financial situation is different, and what works for other folks may not work for you.
When considering things to do with your tax refund, if you can afford to, look past saving and debt repayment to find other ways to use your tax refund wisely. Spending money on yourself is important if it helps to better your overall well-being. Like using part of the money to pay for a year’s gym membership, enroll in yoga classes or hire a personal trainer, if one of your New Year’s resolutions was improving your health.
Enhancing your professional skills to increase your earning potential makes sense when you work in a field that relies heavily on technology. You could also use a refund to launch a side gig or turn a hobby into the business idea you’ve been dreaming of. Still if your tax return is more than $3,000 and you put $2,500 of that amount into a retirement savings account, in 30 years, assuming an average return of 7% per year, that $2,500 will have grown to $19,000!
CONTACT US: Every dollar comes with a decision – but don’t spend it or save it without a plan. While it may be tempting to go on a shopping spree, whether new TV or new Jimmy Choo shoes, that virtually guarantees your windfall won’t last. Consider your options for saving, paying down debt and spending the money on things or experiences that could yield a physical, emotional or professional benefit. Then make a plan and commit so that when your refund arrives, you’ll know exactly how to put it to work. Feel free to contact me, Cory Lyon, directly at 561-209-1120, if you need to reexamine your financial strategy because your goals have changed. At TFG Financial, we believe in customized investment portfolio design and personalized asset management. I act as a fiduciary for all my clients.
TFG Financial Advisors, LLC is a registered investment advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities, and past performance is not indicative of future results. Investments involve risk and are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed here.
