WASHINGTON — Are you thinking about tax time yet? It鈥檚 not too soon.
For most of us, it means a refund, and a dilemma often accompanies the windfall: Should I blow it on something fun or use it wisely?
Of course, you should do something responsible with the money, and most Americans say just that: 84 percent said that they鈥檒l use their tax refunds to pay down debt (30 percent), save or invest the money (28 percent) or use it for necessities (26 percent).
Only 7 percent say they鈥檙e going to splurge on a vacation or a shopping spree.
“I think it is a sign about how people feel about the economy and where we are going. There is still a lot of uncertainty out there,” Bryan Pukoff, a CPA at the Rehmann financial services firm, said to Bankrate. 鈥淭he percentages actually surprise me.鈥�
Other facts from the survey:
Three percent of those surveyed overall took out a refund anticipation loan.聽For people with incomes of less than $30,000, that number jumps to 6 percent.
Greg McBride, Bankrate鈥檚 senior financial analyst, says that鈥檚 a dangerous trap that you really need to stay out of.
“Here is what that really means: You gave your money to the government for free all year and now you need it back so quickly that you’re going to pay a high interest rate just to get your own money back that you could have had all year,” McBride said to Bankrate.
And 3聽percent say that they鈥檒l put their refund into multiple accounts, including an IRA.
“I find that troubling, considering how woefully under-saved for retirement our society is,鈥澛燤cBride said to Bankrate.
Financial advisor Eric Tom tells that your fur best options are:
- Pay down debt
- Use your company鈥檚 401(k) plan (if they have one — if they don鈥檛 set up an IRA)
- Open up a money market account
- Open a separate high-interest savings account separate from your everyday checking account.
Whatever you do, think it over,
鈥淭he tax refund is the biggest windfall people are going to get all year,鈥� McBride said to Bankrate.
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