The Worst Ways to Spend Your Tax Refund

Posted on 03/27/2014

So far the IRS has returned more than $48 million in taxes, giving the average American a refund worth more than $3,000. According to CNN that's up 3% from last year's average tax refund. For most taxpayers, $3,000 is no small chunk of change. Hopefully you have great plans for that money, plans that don't involve one of these horrible ways to spend your tax refund.

The temptation to try to turn your small windfall into a big one can be intense. But this is one of the worst ways to spend your tax refund. The odds are not in your favor and the money will be gone before you know it.

Frivolous Spending
A pair of Jimmy Choos, a wild night on the town, let's face it-- blowing that cash could happen faster than the weather segment on the local news. But when you realize the good that money could have done-- paying down credit card debt, covering education costs, upgrading your washing machine-- you'll regret your moment of inhibition.

Down Payments
Using the money for a down payment on a home is one thing, but using it as a down payment on something you can't afford and that will not appreciate in value is another. Plenty of companies use tax refund time as a marketing opportunity to try to get shoppers to spend refunds on new sofas, televisions or even cars. Just make sure you're not using your tax refund to increase your consumer debt.

Getting away from it all may sound nice, but don't overspend because you suddenly feel wealthier thanks to that tax refund. Even if you use the money to book plane tickets you'll still have to pay for lots of other travel expenses, which your tax refund may not be big enough to cover.

High Maintenance Purchases
If you use your tax refund to put a swimming pool in the backyard don't forget that the pool will cost quite a bit of money in upkeep. Your tax refund will disappear but the pool will still need chemicals, repairs and maintenance. And Uncle Sam won't be around to help out with that.

By Alison Storm

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