Tax refunds have started flowing into bank accounts — the average refund is over $3,000 so far this year — and while many of us know we should be socking away at least some of that cash, the temptation to splurge can be hard to resist.
More than half of Americans plan to spend rather than save the majority of their tax refund, although some of those who spend it will use it to pay down debt, says a recent survey by Capital One Bank. Of those surveyed, 15 percent said they’d use their refund for everyday expenses, 7 percent said they’d take a vacation, and 7 percent said they’d make a major purchase such as a car or appliance.
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Enough people spend at least a portion of their tax refunds that several industries, such as auto dealerships, airlines, and electronics companies, report a boost during “tax buying season,” as consumers with cash to burn make for extra sales.
Some 84 percent of filers have received a refund – and there are plenty of sensible things to do with a few “extra” thousand dollars, says Ben Barzideh, a wealth advisor with Piershale Financial Group in Crystal Lake, Ill, That includes creating or shoring up an emergency fund or retirement savings; paying down debt; or funding a college savings plan for your kids. If your savings accounts are all fully funded, Barzideh recommends pampering yourself in another way, like investing in a gym membership or taking classes to advance yourself professionally.
Some people, of course, find less practical ways to spend their refund from Uncle Sam. Here are a few of their stories:
The Great Gourmet Getaway
Los Angeles resident Andrew Park spent about $1,000 — all of his tax refund and a little more — on a culinary adventure in San Francisco over President’s Day weekend. He hopped on a flight to San Francisco and spent one night each in top-rated hotels near Pier 39 and Union Square.
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“Being the huge foodie that I am, I thought it would be nice to treat myself to fancy dinners and indulge in whatever food and drinks I wanted,” says Park, a 25-year-old PR rep. “I spent about $100 each night on myself at dinner and $75 for a Sunday brunch, where I had the best Bloody Mary I’ve ever tasted.”
His entire weekend was about food. He waited in line in Chinatown for 40 minutes to taste a bakery’s famous egg custard tarts; tried a sushi burrito; and sampled oysters while enjoying the ocean view.
The weekend was pricey — but Park left with a full belly and great memories. “I have absolutely no regrets.”
Doug Howery, a 53-year-old water treatment plant supervisor, says he recently spent his $2,000 tax return to hire an e-book cover designer and an editor for his unpublished novel, The Grass Sweeper God. He’s been working on the tome for 20 years.
Howery says the investment will allow him to market his book himself, bypassing the “gatekeepers” of the publishing industry. “I may have blown my whole tax return, but I will eventually blow the gatekeepers’ doors down because my work is valid – it is good,” Howery says. “I will be on the e-best sellers list, just like Fifty Shades of Gray, another e-book!”
Burning Man or Bust
Melodie Hilton, 52, is a single working mother of two grown kids, with a home in Napa, Calif., that needs maintenance. Her property’s outdoor areas require repairs and she hasn’t contributed to a retirement fund in longer than she cares to remember.
The marketing exec thought about using her tax refund for repairs, but ultimately chose to “take a detour and grow through experiences.” Hilton says she’s been on a “bona fide” vacation only once in the last decade. So to the heck with everything: This year she used $5,000 of her tax refund to buy a 1979 Dodge RV complete with orange shag carpet and to fund her first trip to Burning Man, an art and music festival in the Nevada desert each August.
She’s been planning the trip with a friend since last year. “Sometimes you commit and nothing comes of it. Sometimes, all the planets and motivation aligns and things happen. I’m taking the plunge,” she says.
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Twenty years after she traveled the world, Teresa Mears is still full of memories, thanks to refunds from Uncle Sam. She tucked away two years’ worth of tax refunds, about $,4,000 and $5,000 each, and then quit her job as an editor for the Miami Herald to take a nine-month world tour of 16 countries across Europe, Asia and Australia. Among her stops: Ireland, Spain, Norway, West Germany, Istanbul, and China.
“I was turning 30 at the time and realized I had never been anywhere, despite the fact that I had always wanted to travel,” Mears says. “I spent a year planning the trip, reading travel books and magazines. It kept me sane during a difficult year at my job.”
Mears was lucky enough to be rehired by the newspaper when she returned from her trip, and she’s been more prudent with her tax refunds ever since. “That was my one big splurge,” she says. “After that, I spent my tax return on things like installing central air in my house.”
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