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You filed your taxes promptly and have received your tax refund.

It’s a big chunk of change, a lump sum of “free money.”

What are you going to do with it?

Tax time is always stressful, and once you’ve finished your taxes and received your refund, there’s a release of that stress and a rush of endorphins when you’ve got that check in your hand or it’s arrived in your checking account….

You just want to go out and spend it!

On a luxury item or two…

But before you splurge on yourself or a loved one, please consider this advice:

Splurging can be fun, but then the money’s gone as if it had never been.

Instead of splurging, put that money to work for you. Don’t treat it as “found” money, treat it as your investment for future security.


The average American and their savings account

Since 2015, the financial research firm GOBankingRates has surveyed Americans to see how much money they have in their savings account.

The answers were very concerning…over half of Americans have less than $1,000 in their savings account.

Well, that’s a savings account.  Maybe they have more in their retirement account.

No, not so. According to Forbes, 25% of Americans don’t have any retirement investments either.  The numbers vary by age bracket, but 13% of people over the age of 60 don’t have any savings in the bank, or retirement accounts.

This in a day and age when news about the solvency of Social Security and Medicare are in flux.

If you are living pay check to pay check, it’s time to rethink how you spend even small sums.

And when you get a large sum like a tax refund check of $500 or $1,000 or even more, it gives you the opportunity to start that savings account or investment account that will benefit you, and your family, in the future.


So what’s the best thing to do with your tax refund?

Pay off your credit cards

According to Nerdwallet, the average American household is $6,849 in debt on credit cards.  (We won’t even go into student loans or home mortgages…it’s credit card debt that is taking the toll on American’s financial health.)

These days, most credit cards have interest rates of 19% or higher.

And these days, most Americans only pay the minimum monthly payment on their credit card – which takes care of the interest and a very small amount of the principal. So, by the time they’ve paid off their credit card debt, any items they purchased actually cost them double or even triple the original purchase price!

So if you have credit card debt, why not drop that lump sum from your tax refund onto the card with the smallest balance? Pay that card off, and then use the money that used to go to that card to pay off the debt of the card with the next smallest balance.

By paying off your credit card debt, that $500 or $1,000 tax refund will free up that much money and perhaps more over the course of a year, in credit card interest.

And that’s money you can put in your savings account for a rainy day, or into your retirement account so you can be ready for whatever the future may hold.


You don’t have credit card debt?


Do you have any other debt? Perhaps put it towards your home mortgage to save a bit on interest there, or on your student loan for the same reason.


Invest in items for the house

Rather than splurging on a weekend getaway, why not purchase items to be used around the house. Items that will save you time or money in the long run, like a dishwasher or a clothes washing machine.

Feeling good….

We don’t mean to be a killjoy when it comes to celebrating a large tax return. Spend a few dollars on yourself or a loved one, sure.

But the majority of that refund can actually go toward freeing up yet more money in the future, and that’s always a good thing.

More advice on how to make the most of your tax refund: