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Spend Or Save Your Tax Refund?

April 4, 2012, 9:50 PM by Angela Kennecke

Spend Or Save Your Tax Refund?

The average tax payer gets a nearly $3,000 refund.  That's a nice little windfall and there's a lot of temptation to spend it.

When the check arrives in your bank account, it's natural to feel the urge to spend it.

"I'm kind of hoping to put it toward a kayak.  That's my main goal. I probably should spend it on my car to fix it up, but I really want a kayak," Danielle Quist said.

"I just spent it on new tires for my car.  Yeah, it was a bummer," Alex Cahlander-Mooers said.

Others plan to save some, spend some.

"I guess the rest you could just throw in the bank, but it's more important we start putting it back in the economy," Len Abraham said.

Of course, financial planners would advise you against having the government withhold so much money from your paycheck and use it for free all year.

"It's not good to have the government hold your money for the better part of the year. It doesn't make good economic sense.  But again for some people that just can't save, money burns a hole in their pocket. It is a way for them to accumulate money to use for a project," Neil Graff of Eide Bailly said.

But Graff says paying down debt should be the number one use for your tax refund. 

"A way to really help ease your life is to reduce your debt. If you can reduce your debt payments or your monthly payments, your life is going to be easier," Graff said.

Once you're out of debt, Graff advises saving it in the form of investing in an IRA or your 401(k) plan at work. 

"It gives them a tax advantage investment and it locks the money up where they can't get at it in some kind of minor emergency; it's a two fold advantage for them," Graff said.

Of course, spending it is a lot more fun.  The number one thing people spend their tax refund on is electronics, followed by a vacation.  Go to my KELO Angela Kennecke Facebook page and tell me what you plan to do with yours.

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