Many Americans expect to receive an income tax refund this year on taxes paid to state and federal governments last year. These tax refunds be a substantial amount of money, typically ranging from a few hundred to a few thousand dollars for the households that receive them. It can be tempting to spend that money quickly on things that you desire, but some purchases will simply waste the money you have received while providing you with little in return. Here are some things to avoid wasting your income tax refund on this year as well as some better uses for your money.
New Clothing
Many people choose to purchase new clothing with their income tax refunds, generally spending more on each article of clothing purchased than they would generally spend on a typical day. Receiving a tax refund is not an excuse to splurge on clothing, especially if you are purchasing items that you may wear once or twice per year, that may not fit in several years, or that are trendy and will become dated by next season. The same goes for shoes, fashion accessories, jewelry, watches, and purses. Put your income tax refund in your savings account instead and only replace these items when you must out of funds in your regular monthly budget.
Gambling
Gambling is a surefire way to lose the money that you have received as an income tax refund. What many gamblers fail to remember is that the house always wins and that the deck is stacked against you coming home with more money than you left with. In a report from late 2012, the Nevada State Gaming Control Board showed that the win percentage odds for craps were about 13.5 percent and odds were reported as around 31 percent for three-card poker. People who played the slot machine faced even lower odds, with win percentages of less than 10 percent on average. Instead of throwing your money away at the casino, start or bulk up your emergency savings account or pay off high interest debt like credit card balances.
Expensive Vacations
Spending your entire income tax refund to vacation in an exotic location is generally not the best use for your additional funds. People that are vacationing in a tourist area generally pay a premium for everything from lodging to food to toiletries, often spending much more than they planned before it is time to return home. If you want to have an adventure, take one closer to home so you do not have to pay for days of hotel rooms and restaurant meals. Take a series of day trips using your home as your base camp and explore the zoos, national and state parks, festivals and dining options that are available. You will save money while still making memories with the ones you love.