How to spend your tax refund

Published: Mar. 21, 2023 at 5:58 PM CDT
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BISMARCK, N.D. (KFYR) - With tax season in full swing, many people are eagerly anticipating a refund. According to the IRS, the average tax refund in 2023 is expected to be around $3,000. If you happen to be one of the lucky taxpayers expecting a check from the federal government, financial advisors say it’s important to use the money wisely.

The story in the financial world for 2022 could be summed up with four words: “inflation” and “interest rate hikes.”

Last year was also the first year U.S. citizens did not receive a stimulus check since 2020. But after a long winter with record amounts of snow, some people are thinking of a nice vacation or toys as a way to spend an IRS refund.

“I don’t think I’ll see a tax refund anymore. But if I did, I would spend it on recreation stuff, outdoors, hunting, trapping fishing stuff. I’d waste it if I got one,” said Bryan Sand or Bismarck.

Some financial advisors say it’s best to put off buying new toys or a family vacation with any money you get back.

“If you have high-interest credit card debt, absolutely put it towards that. I know it’s not fun, it’s not as fun as a family vacation but maybe that’s where that credit card debt came from was your family vacation, put it towards any high-interest debt,” said David Wald, president of Securian Financial.

Others have plans to use it to pay off student loan debt.

“Actually, that’s going towards college. Debt and things like that, so that’s what that’s going towards,” said Dion Madler of Mandan.

Wald says if you are able to stash your refund in a savings account, it can help you avoid taking on high-interest debt in the future, and interest rates on savings accounts are getting better.

Ultimately, the consumer decides how to spend a tax refund depending on individual financial goals and priorities. Financial experts say by being thoughtful and intentional with your refund, you can make the most of this extra income and set yourself up for financial success in the future.

Wald mentions that tax season can feel overwhelming to some, but meeting with your tax preparer or financial advisor and voicing these concerns can be helpful in creating a plan to make taxes just like any other financial responsibility.