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Harris-Courage & Grady, PLLC Feb. 27, 2016

Last year, the average tax refund was just over $3,000. That’s a lot of money! Many people have a hard time deciding what to do with their tax refund.

Let’s look at four options you should avoid:

  1. Don’t spend it all on something frivolous. Make your money work for you.

    • If you invest your tax refund every year, you can greatly increase your retirement savings. $3,000 invested every year into an IRA with a 10% return is worth $180,000 after 20 years.

    • If you’d rather spend your refund, spend it on something you’ll always remember. Take a vacation somewhere you’ve always wanted to go, or start taking lessons for something you’ve always wanted to learn.

    • You could also spend your tax refund to create a bigger tax refund for next year. For example, if you upgrade to energy-efficient appliances or buy solar panels, you’ll get a tax break and energy savings throughout the year.

  2. Don’t ignore the possibility of getting out of debt. With your tax refund, you can easily hire an attorney and get your bankruptcy started. Bankruptcy is a way to get rid of your debts and get a fresh financial start. If you are struggling with debt, give our Syracuse bankruptcy law office a call and see if bankruptcy might be right for you.

  3. Don’t get into more debt. If you spend your refund as a down payment on a new debt, you’re just creating more financial problems for your future.

  4. Don’t use the money to catch up an unsustainable lifestyle. If you are using your tax refund to get caught up on your bills, that’s a red flag that you are spending too much on a lifestyle you can’t afford. Take an honest look at your life and your finances. Think about what you can change so that you can live within your income. If the reason you can’t live within your income is that you have overwhelming debts, it’s time to give our office a call.

A tax refund is an opportunity to improve your financial life. Take the time to consider how you spend it. You want to ensure your decision will make you happy in the future as well as right now.