Not only are tax refunds up this year; so too are the number of people receiving them. Some 82% of filers have gotten money back, up from 78% last year. Accounting for the increases, the IRS says, are more generous tax credits for things like children living at home, first-time homebuyers and late claims related to those 2008 stimulus checks. Meanwhile, the recession and slumping incomes have rendered more people eligible for such credits. The larger refunds are a welcome boost for the economy. In all, the Federal Government has cut refund checks totaling $259 billion — up 17% from a year ago and already the rough equal of total refund payments of $261 billion in 2008. More people than ever are using their refund to pay basic bills, according to an AP poll. For example, 31% said they were using their refund to pay credit card debt — up from 17% a year ago. The percentage using their refund to pay utility bills and rent or their mortgage has roughly doubled too. A slightly greater number say they will splurge on a new car (5%) or vacation (11%). (See 10 smart ways to use your tax refund.)
Bear in mind that when you use onetime income to meet recurring expenses, you're likely headed for trouble down the road. And if you're splurging out of frustration or some misguided notion that you will help rescue the economy, think again. Spending to feel better is a temporary fix and usually just buries you further and makes you feel all the worse later on. Think about how you spent your refund last year. Wish you had the money back? As for the economy, that's not your responsibility and it will actually do better in the long run if you save and invest. So cut costs and live within your means, and use your refund for a onetime fix.
Click here for 10 ideas on how you can spend your refund for solid financial and happiness returns.
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