Some Americans Plan Fun for Tax Refund

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The National Retail Federal did a survey recently that asked Americans what they were going to do with their tax refund this year. 13.2% said they would be buying a big ticket item like a new television or some furniture, up from 12.5% last year. 11.9% plan on taking a vacation, which is more than the 10% who planned on taking a vacation with it last year. 29.7% went with the ho-hum answer of spending it on everyday items.

Before you start complaining about people being irresponsible, it turns out that most people will either pay down debt or put it towards savings. 41.9% will use their tax refund to pay down debt, 42.1% will be using it for savings. What’s interesting is that since 2007, the percentage of respondents who said they’d pay down debt went up and then down, peaking at 48% in 2009. 41.9% is the lowest it’s been since 2007, when it was 43.1%. Savings rates, however, have been steadily increasing since 2008. (One caveat, this was a survey of what people planned on doing with their refund… how many actually saved or paid down debt is another story!).

{ 33 comments, please add your thoughts now! }

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33 Responses to “Some Americans Plan Fun for Tax Refund”

  1. Ryan says:

    A portion of our refund went towards plane tickets for upcoming vacation, while another portion went to starting our emergency fund. The leftovers are buffer in the checking account.

  2. Jenny says:

    We spent less than a third of our refund on a trip to Disneyland for our one year anniversary. This paid for everything except food. The remainder went to paying off nearly a third of our highest interest debt. We already have an emergency fund. This is the last chance we’ll have to go to Disneyland without kids for the next 20 years probably and we won’t go at all till the youngest is at least three. We’re taking the opportunity to go now while we can.

    • Shirley says:

      Ah yes! Disneyland with kids is so much fun with seeing their wonder and enjoyment, but without kids it is a fabulous time to see it all and really enjoy the ‘adult stuff’ that the kids are not that interested in.

  3. Bey says:

    This year’s refund will only be about $100, so Uncle Sam didn’t get a big no-interest loan from me. I *already* used that money for savings, and earned 3.5% on it. I don’t wait for a ‘windfall’ from the government returning my own money to me, to buy a new appliance or take a trip to see my grandkids.

    But for those folks who will use a refund to pay down debt, maintain your home or car, or stoke your emergency fund, I applaud the choice.

    • cubiclegeoff says:

      As much as I’d prefer not giving a free loan to the government, it often is complicated when your state taxes are calculated in a different way and so you end up owing a significant amount to the state.

      • govenar says:

        Maybe you could make estimated tax payments to the state throughout the year, to avoid a penalty for not paying enough to the state, while keeping your withholding low so that an excessive amount doesn’t go to the federal government. (But, maybe that’s too much hassle.)

        • cubiclegeoff says:

          Much more of a hassle to do quarterly payments to the state than to give the government the free loan of $1500 at less than 1% interest.

          • Strebkr says:

            I have my normal job withhold an extra $50 on top of my normal withholdings just to avoid little traps like this. It doesn’t make financial sense, but I’m loosing $30 in interest. Thats a lot cheaper then hundreds in fines for not withholding enough or failing to pay quarterly taxes.

    • SoonerNATX says:

      3.5%…playing with stocks?

  4. DoubleD says:

    Mine went towards building up my emergency fund. I expect to change my deductions this year now that all my debt is paid and, like Bey, won’t be expecting another big refund in the future.

  5. Jason L says:

    I’m not getting a ton of money back this year, but what little I get back is likely going straight toward my emergency fund. Not sexy, but I’ve definitely grown more conservative over the past few years as the economy has tanked.

    Jim, do you have any recommendations about what people should do with tax refunds?

  6. zapeta says:

    I think I’ll be getting back a small refund, and I plan to save it by directing it in to my Roth IRA.

  7. SoonerNATX says:

    i adjusted my witholdings per the website calculator and ended up getting 4 digits back. I must have missed something!
    With a car hitting 179k miles (although still in awesome condition) I am using what i didnt expect from the gov to save up for a new(er) vehicle.

  8. Jennifer Lissette says:

    My husband and I received a big fat refund this year. It hit our bank account Friday morning and was sent, in its entirety, to our mortgage lender by Friday afternoon. We can’t be tempted to blow part of that money if it doesn’t sit in our bank account! And now our original principal amount is down 4%!

  9. WRXTuan says:

    I am planning to spend my $6 tax refund on lunch. I thank my financial planner and my workplace on making sure I did not offer an interest free loan to the government.

    • Courtney says:

      We nailed it on state taxes ($19 refund) but neglected to account for the ‘Making Work Pay’ credit and so we ended up with a $455 refund instead of owing a couple hundred bucks (which we had already set aside). Between the refund and the money set aside, it amounts to enough to cover our bedroom furniture purchase we made last month (instead of taking money out of general savings).

  10. skylog says:

    i go against the grain with what most people would suggest here, but i do plan for a refund. it is not a great deal of money, and while i could “use” the money in some way with each paycheck, i like the lump sum.

    i generally make a few purchases with the funds. nothing large, but one “fun” item for myself with the rest being “useful” and needed items. the rest goes toward investment, savings and debt if any is there.

  11. MoneyNing says:

    Too bad these surveys don’t really get into more detail since the numbers add up to more than 100% so multiple answers were likely allowed.

    After all, saving $10 of what is left over from a $2,990 TV purchase still allows me to check on the box beside saving it!

  12. Frugal says:

    For a change, I will spend it on a big TV, now it has become a necessity for me.

  13. Justin says:

    As much as I’d love a big TV, I’m skipping out on account of the pressing need to pay down the remainder of my pesky debt and bulk up my savings rate a little.

    Interesting that the number of people planning to pay off their debt isn’t on a steady upward OR downward trend…I’d think, if it were going to be changing in an inconsistent way, it would have increased as the recession began and started to decrease as people adjusted to being more careful with their credit cards, maybe peaking last year? Or am I being too naively trusting of Americans’ financial sense?

  14. I got 7k back this year, and guess what I did with it! I paid off half of my car loan and boosted my emergency fun. I know, boring huh? I definitely did not have the “cool” story at work that week. To me it was thrilling because I’m that much closer to being completely debt free!

  15. The extra 2% I get from lowering the FICA payroll tax is going to my 401(k). For any tax return, I will divide it and put some in my kids 529 College Savings Fund, pad my emergency savings fund, and buy something nice for myself.

  16. Shirley says:

    Our refund plus some went straight into savings to await a good rate on another CD, though I’m wondering if that is actually ever going to happen.

    At our ages (69 and 73) we are most happy to finally be able to just stay home and only do what we want to do and we have no outstanding debt or desire for anything we don’t already have. This is another wonderful time of life for us and is well worth our having each worked 50 years to attain.

  17. Strebkr says:

    I should be expecting about 3-4k back. I know it sounds like a bunch, but we have to withhold extra from our normal jobs because we have a side business.

    We are using most of it to put a patio on the back of our house. In the long run, this is a much needed addition to our house and will add significant value (relative to our investment) in our type of neighborhood.

  18. Jaren says:

    Not sure how much I’ll be receiving, but I’m definitely putting it straight in the emergency fund.

    Has anyone ever started a college fund with theirs? Not for me at the moment, but just a thought.

  19. Dave says:

    I’m going to in Vegas, so I’m going to be having some fun with about 1/3rd of it… If I wanted to get real daring, I could put it all on Black… 🙂

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