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Could the way we think about a tax refund play a part in how we use that refund?

Posted at 5:39 PM, Apr 16, 2019
and last updated 2019-04-16 17:39:56-04

Could the way we think about a tax refund play a part in how we use that refund?

For most of us, tax season just ended and millions of people will receive refunds this year. The average federal refund last year was right around $3,000.

According to a recent Forbes article, the way you perceive that refund will influence what you do with it.

Carl Carlson, CEO of Carlson Financial explained further. He said people view a refund in different ways, some see it as their hard-earned money coming back to them, others see it as a windfall.

Whether the refund is expected or unexpected it can impact how people view it, and how they perceive the refund will in turn impact what they do with it.

Well if someone wasn’t expecting the money they are more likely to view it as a windfall and spend it more liberally, compared to someone who was expecting the refund and is more likely to save it or stick to their normal spending patterns, Carlson said.

There’s not necessarily a right or wrong answer on how to treat a refund. Carlson advised people to adjust their withholdings so that they aren’t loaning the IRS their money all year.

Regardless, people love getting that refund “bonus” check, so if you anticipate that it’s coming it can actually be a good way to get a jump start on some savings goals like funding a retirement account or saving for a down payment.

The strength is in the planning, Carlson said. He thinks more importantly is starting to think about that refund early on and give yourself time to plan for it.

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