Based on the latest information and expert advice, here’s a rewritten article:
NEW YORK (AP) — According to the most recent IRS data, the average taxpayer is receiving a $2,852 refund, which is $75 more than last year. However, financial experts generally advise using this money to pay off debts and save for the future. Nevertheless, many individuals find it challenging to follow this advice due to the rising cost of living and high interest rates.
Courtney Alev, a consumer financial advocate at Credit Karma, stated that around one in four taxpayers view their refund as “free money” and intend to spend it on items they couldn’t afford otherwise. While this behavior is common, Alev warns that with rising costs and interest rates, the most prudent course of action is to utilize this money toward achieving long-term financial objectives.
Emily Garcia, a marketing professional in Toledo, Ohio, chose to allocate her $1,000 refund towards purchasing outside furniture since the price tag was significant, and debt repayment would not significantly impact the principal. Although Garcia and her spouse own a home and are still servicing the mortgage, they opted against utilizing their refund to pay down their debt, citing that the sum would not produce a substantial change.
Megan McClelland, a high school counselor in Petaluma, California, intends to spend her $1,000 refund on traveling, including expenses associated with attending a friend’s wedding and a bachelorette party. Since McClelland recently qualified for loan forgiveness under the Public Service Loan Forgiveness Program, she has been devoting $500 each month to her savings account, which was previously allocated to repaying her student loans. Therefore, McClelland views her tax refund as a means of indulging herself in pleasurable experiences without resorting to borrowing.
According to the IRS, as of late last month, they had processed approximately 141 million tax returns and distributed approximately $261 billion in refunds, representing a 2.2% increase compared to the same period in 2023. Matt Schulz, the Chief Credit Analyst at LendingTree, suggests that individuals prioritize paying down debt and saving simultaneously to avoid falling back into debt during emergencies. Schulz emphasizes that building some savings while settling loans prevents being trapped in a cycle of debt that numerous people encounter when dealing with unexpected expenditures. Alev concurs, stating that although people enjoy treating themselves, it is critical to use the refund to strengthen their financial situation.
The Associated Press receives funding from the Charles Schwab Foundation to enhance financial education and explain financial concepts. The independent foundation is distinct from Charles Schwab and Co., Inc., and the AP bears sole responsibility for its journalism.
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