With tax season here, many people are looking forward to the possibility of a big refund and pondering the best way to spend the extra cash. A recent GOBankingRates survey revealed some interesting differences in how people plan to use their tax refund check including those between men and women, age groups and income levels.
Ultimately, there is no right or wrong way to use a tax refund. Here are five of the most popular things to do with your refund.
PAY OFF DEBT
Among women who were polled, the most popular use of a tax refund is to pay off high-interest debt. Thats a smart plan, according to Jared Snider, a financial advisor at Exencial Wealth Advisors.
For the average person, using a tax refund to pay down outstanding unsecured higher-interest debts, like credit card debts, is a great way to use the extra cash, he said. Nearly 30 percent of women said they plan to use the refunds to pay off debt, compared to about 25 percent of men.
PUT THE MONEY IN SAVINGS
Women and men are about equally likely to plan on saving their tax refunds, but that view varies somewhat among age groups. People age 65 and up, and those age 25 to 34 are the most likely to plan on saving their refund, according to the GOBankingRates survey.
I would look at using a tax refund to ensure that folks have an emergency fund for expenses, said Snider. At least three months (worth) is important.
PUT IT TOWARD A VACATION
After a hard year of work, many people are simply ready to settle down and take a nice vacation. Sometimes cash can be a little tight, though. Thats where a hefty tax refund can come in handy.
The third most popular use of a tax refund, according to the survey, is putting the money toward a vacation. Nine percent of people choose this option. Setting a budget for vacation, and sticking to it, can help you make sure you dont overspend and potentially go into debt.
A big tax refund can also be used to help fund the down payment on a major life investment, like a house or a car. In the survey, 5 percent overall said they planned to put their refund toward a major purchase.
However, men were a little more likely (4.7 percent) to use their refund this way than women (4.2 percent). People with incomes from $50,000 to $99,000 were slightly more likely (5.6 percent) to use their refund this way, compared to either people making less than $50,000 (4.1 percent) or $100,000 to $149,000 (2.6 percent).
SPLURGE ON A PURCHASE
Another popular way to use a tax refund is to splurge on some small luxury you have been wanting for a while. From a new TV to shoes or a purse, the little things in life can make a big difference. Men were more likely than women to use their tax refund this way, according to the survey.
Younger people, especially in the 18 to 24 age bracket (7 percent), were more likely than people 65 and up (2 percent) to splurge on a purchase with their refund. Finally, those with a lower income were much more likely to splurge on something for themselves than those in higher income brackets.