Tax Refunds: Prioritizing Financial Goals Amid Rising Cost of Living

Based on the latest information provided, experts still recommend using tax refunds to pay down debt and contribute to savings, but many individuals are opting to splurge on discretionary expenses due to the rising cost of living and high interest rates. According to Courtney Alev, consumer financial advocate at Credit Karma, one in four taxpayers view their tax refund as “free money” and plan to spend it on items they couldn’t afford otherwise. However, Alev suggests utilizing the refund as an opportunity to advance financial goals, as the best thing one can do during these challenging economic times. Emily Garcia, a marketing professional in Toledo, Ohio, used her refund to purchase patio furniture, as she saw it as a necessity. Megan McClelland, a high school counselor in California, is allocating her refund towards travel after becoming debt-free through the Public Service Loan Forgiveness program. Matt Schulz, chief credit analyst at LendingTree, reiterates that paying down debt and saving simultaneously is the most financially prudent course of action, as it helps break the cycle of debt accumulation. The Associated Press notes that individuals have diverse responses when receiving tax refunds, but Credit Karma encourages using the refund to enhance financial wellbeing. The article also mentions that, as of late April, the Internal Revenue Service (IRS) had issued around $261 billion in tax refunds, which marks a 2.2% increase compared to the same period in 2023.