The Internal Revenue Service started accepting and processing 2022 tax year returns on January 23, and several early filers already obtained their tax refunds in 2023.
Poll: How Do You Plan To Spend Your Tax Refunds In 2023? (PHOTO: Forbes)
What You Can Do With Your Tax Refund In 2023
The IRS had issued 13.34 million refunds totaling $26.65 billion as of February 10. The average tax refund is worth $1,997, meaning millions of Americans have some extra money on hand right now. If you haven’t accomplished your taxes yet, don’t panic. The deadline to file isn’t until April 18. Regardless, if you’re anticipating a refund, you’re probably feeling very excited. No matter what you do with the money, obtaining an extra influx of cash is always pleasant. Curious about what other people are doing with their tax refunds? GOBankingRates recently surveyed to find out.
Here’s what respondents had to say from the poll. According to the poll, people are most likely plans on saving and paying bills. 25.75% from the poll plan to put it in savings, 21.16% choose to pay bills, 19.66% to pay off debt, 15.37% do not expect to receive a refund, 7.58% plan to Invest it, 5.99% want to treat their self, 3.59% want to use it for travel expenses and lastly, 0.90% say they will donate it.
Most people plan to be financially smart with their money, which was noted by Faron Daugs, CFP, wealth advisor, founder & CEO at Harrison Wallace Financial Group, based in Libertyville, Illinois. Furthermore, the best way to use a tax refund is by setting savings, paying bills, and paying off debt the top three choices highlighted by the GOBankingRates survey are very good moves for your financial future.
More Good Moves For Your Tax Refund In 2023
According to the author of “The Financial Glow Up,” Wanda Bowman, said that the refund should go toward credit cards before saving. She also stated that a basic savings account can yield anywhere from 1.5% to 3% interest, while the average credit card interest rate is around 21%. Additionally, she said the recent average yield on a balanced 401(k) plan is 60% stock, and 40% debt/cash is about 8% to 10%.
If you are in serious credit card debt use the tax refund to settle the debt because only earning 1% to 3% in interest on a savings account when you are paying 21% each month on credit card debt is not a good use of your funds Bowman added. On the other hand, if you haven’t accumulated severe credit card debt, she advised using your tax refund to set up an emergency fund with three months of expenses. If you already have one in place, she recommended investing in real estate, an index fund, or a retirement plan. Bowman said that “the goal in life is to be financially independent so that you can live your life the best way without fears of financial difficulties with confidence and security.”
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