Tax return 2020: how to spend your refund. This is how you should spend your income tax refund to prepare for a recession.
The IRS officially opened the 2020 income tax season last Monday, January 27th, when it began accepting individual tax returns.
The majority of Americans are expecting an income tax refund, but just 10 percent of those expecting an income tax refund will spend it on an item or experience they want this year, according to research by Credit Karma.
More than 50 percent of them plan to put their refund dollars towards bettering their financial situation instead. That’s great news, especially since many of us are bracing for an economic downturn in the next year or so.
Tax Return 2020: How to Spend Your Refund
Going to a nice dinner, buying new clothes or planning a vacation are all lovely things to do but is your income tax refund really best spent ‘treating yourself’? Maybe not, particularly if you’re in debt or don’t have much in the way of emergency savings. In fact, 54 percent of Americans agree that money is better spent boosting savings and reducing debt.
Some 30 percent of Americans plan to save their refund. Most of them specifically want to build emergency savings. Another 24 percent plan to use their income tax refunds to pay down debt, the most common goal being to hammer away at credit card debt.
Building savings and paying down debt are two of the three tips for financial success in 2020 that Ilyce Glink, publisher of ThinkGlink.com and author of many books on real estate including 100 Questions Every First-Time Home Buyer Should Ask, outlines in a recent article on setting financial resolutions.
If you want to put your refund towards savings or paying down debt and don’t know where to start, you can use our Emergency Savings Calculator or the Credit Card Debt Payoff Calculator to build your own strategy.
Spending Tax Returns on Necessities
Over 30 percent of Americans will put most of their income tax refund towards paying for necessities like bills, rent and groceries.
Numerous research studies have concluded that more than two-thirds of Americans can’t keep up with basic expenses using their regular monthly income. A study by Morning Consult/CNBC found 35 percent of Americans use their credit cards to pay for necessities and medical bills. Research by Morgan Stanley found half of Americans spend more than they earn each month.
A Bankrate survey found three in 10 U.S. adults have no emergency savings and couldn’t cover three months’ worth of expenses. The Federal Reserve Bank found that 40 percent don’t have $400 in cash for emergencies and Freedom Debt Relief found over 40 percent of Americans don’t set aside any money for their household retirement plan.
In order to remedy their many financial shortfalls, Americans should pay more attention to how they’re spending and what you do with your income tax return this year is a good place to start.