The average American taxpayer is receiving a tax refund of about $3,000 this year. Some are delighted. I ask a question.


What this person did, over the course of the previous tax year, was amazing in a country where taxes have generally been going up over years. What he or she did was, in effect, loan the government about $60 a week, every week of the year, and then have the government take its time and return the money to him or her at zero percent interest. The taxpayer should discuss his or her situation with his or her employer, who withholds tax money each pay period, and probably take home more money each pay period.

Still, getting $3 thousand can be turned into an opportunity to make your financial life a lot better.

What Should I Do?

The secret in a lot of things in life, including personal finance as well as competitive sports, isn’t to try to be brilliant. It is to be consistently good. It is to avoid self-destruction. And that’s certainly true with the average tax refund: Don’t blow three thousand dollars. Money is hard to earn. And it is very difficult in welfare states to keep it out of the taxman’s clutches.

The Smart Play

And the average tax refund may be the best chance for a person falling behind to reduce credit card debt, start an emergency fund or starting saving.

Such as the advice of financial professionals on how one should spend a tax refund.

“The Federal Reserve said millions of Americans don’t have any emergency reserve fund. Use your refund to set up an emergency fund of at least $1,000,” says Simon Zhen, a research analyst with

He adds the second priority is to reduce card debt.

Getting Rid of Outrageous Card Costs

Getting twenty percent on an investment is an extraordinary rate of return. Most investments, most markets, over the course of a year, don’t return twenty percent. Yet here is the use of your money that guarantees twenty percent.

With average credit card interest rates at around twenty percent, the cardholder carrying card debt month to month has a great opportunity, advisors say.

“For many people, it makes a lot of sense to reduce credit card and student loan debt,” says Lewis Altfest, an advisor in Manhattan. Altfest says an emergency fund is also needed to ensure one won’t fall back into debt.

Red Ink as Far as One Can See

And there’s a lot of debt.

“As of December 2018, total U.S. consumer card debt is $870 billion, the highest total ever,” according to the American Institute of Certified Public Accountants (AICPA).

This “let’s borrow some more to live for today” philosophy has been going on for generations. It is one of the reasons so many of us have ulcers and why bankruptcy law is booming. Often we are unlike our grandparents, who lived with much lower levels of debt, we live a different way.

Indeed, the amount of card interest and fees paid are up some 49 percent over the past five years, says MagnifyMoney, a credit monitoring group.

What Now?

After reducing or eliminating outrageous card debt, there are other things a MoneySense person can do.

It also makes sense to use a refund to begin an emergency account or fund a savings program, such as making an IRA contribution, financial pros say.

Tax refunds, as of mid-March, averaged some $3,068, up about $22 over last year, says Credit Sesame, a credit management site.

Where are they going?

“I’m Going on Holiday”

Thirty five percent of Americans plan to use it for savings or retirement funds, according to tax preparer H&R Block. It said 11 percent plan to take a vacation, 22 percent haven’t decided and 19 percent will fix homes or make a down payment on a new one.

If you want to take a vacation remember something: It is difficult to enjoy yourself on a holiday when you are constantly asking yourself this: “How am I going to pay for this when I get home?”

The way to live sensibly is to be able to pay for things with real money; not plastic money that comes with extra charges such as twenty percent interest.

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Gregory Bresiger
Gregory Bresiger

Gregory Bresiger is an independent financial journalist from Queens, New York. His articles have appeared in publications such as Financial Planner Magazine and The New York Post. The eBook version of his latest book "MoneySense" is available now for Free Download by clicking HERE

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