It is estimated that the average federal tax refund in for 2019 will be between $2,000 and $3,000.  Unfortunately, this marks a downward trend in the average refund due to major tax reform in 2017.  Whatever your feelings may be about the current tax laws, get ready to make the most of your refund this spring.

I always wonder how people decide how to use their refund.  Personally, I prefer not to receive a refund, which works out to keep more money in my pocket throughout the year.  But, if you are expecting a windfall this year, here are some of the most popular ways to spend your refund.

Vacation

You work hard all year, make it through the holidays and a cold, dark winter only to emerge in the Spring with cabin fever.  So a few thousand dollars showing up in your bank account in May is like pennies from heaven, providing the perfect excuse to kick back and relax for a few days.

Personally, I love to travel. Experiencing new people, new places and new things are an important part of personal growth and development.  But assuming you are going to receive only an average refund this year, you may not be able to get too far in your travels.

That said, consider putting a portion of your refund aside into a vacation savings account.  Add to it a little bit every month, and come July, you may have a 5-star vacation on the horizon.

Savings/Down Payment

For many people, owning a home is quintessential to living the American Dream.  But even with FHA financing demanding only 3.5% down, the average NJ home requires a down payment somewhere in the neighborhood of $17,500.  For most families, it takes years to save up that kind of dough.  So if you receive an “average” refund every year and stash away somewhere safe, you can likely commit to a 5-year home buying plan with no problem.

To be honest though, if home ownership is your dream, I recommend ditching the interest-free savings plan the IRS offers and speaking with a financial consultant to get the best bang for your buck.   Not sure you get what I’m driving at?  Don’t worry, most people don’t…. read closely.  The tax refund you receive from the IRS is your money.  Your employer withheld these funds from every paycheck and paid it over to the IRS.  The IRS got to keep your money all year only to give it back to you without interest!  Even banks are paying 0.50% on savings accounts these days.  If you want to take better advantage of your money and keep more in your pocket, start by speaking to a tax professional.  You may need to adjust your exemptions and withholding.  Ideally, you won’t owe the IRS and the IRS won’t owe you at the end of the year.  Then you’ll have more money in every paycheck to use how you’d like, including for saving and earning interest.

Pay Down Debt

For people who carry a balance on their credit card(s) all year, tax season is a popular time to pay off debt.  But before you take this route, you should ask yourself if this plan makes any sense at all.  If you have “average” debt ($7,000-$10,000) and only an “average” tax refund ($2,000-$3,000), you won’t be making much of a dent in your debt at all.

For example, you may have a $7,000 credit card bill and a $3,000 tax refund.  Great, you can reduce your debt to $4,000 in the blink of any eye.  Except the remaining balance continues to accrue interest (average APR is about 16%) and if you’d like to pay the rest of the balance this year, you’ll need to make monthly payments of at least $375 (and you’ll have to cut up that card so you aren’t tempted to use it again).

Even with the best of intentions, this is not reasonably likely to work out for most people.  By the time clients get to me, they’re usually drowning in upwards of $20,000 in debt at 25-30% interest.  So unless you’re expecting a Trump sized tax refund this year, I can offer a better solution for dealing with your debt: BANKRUPTCY.

For a little more than half of the average tax refund, you can potentially eliminate 100% of credit card debt in as little as 4 months with NO monthly payments.   It doesn’t matter if you’re $7,000 or $70,000 in debt – and you can be current on your accounts or years behind.  It makes no difference.  Collections? Judgments? Wage garnishments? NO PROBLEM.  Bankruptcy offers immediate relief in a quick and easy process without ever even seeing a Judge or the inside of a courtroom.

In this case, you rid yourself of debt and still have nearly half of your refund left over for your dream vacation or home.

Benefits of Bankruptcy

  • Eligible filers eliminate 100% of credit card debt in as little as 4 months
  • Relief begins immediately upon filing (end harassing collection calls and protect yourself from lawsuits, wage garnishments and repossession)
  • start rebuilding credit immediately after filing
  • Pre-filing payment plans (for legal fees and court costs) are readily available

Still unsure about Bankruptcy?  Read through many frequently asked questions in one of my earlier posts:  https://leclawonline.wordpress.com/2018/06/14/bankruptcy-faqs/ 

Dispel all of your bad notions about Bankruptcy!  Read Bankruptcy Myths Debunked! in one of my earlier posts: https://leclawonline.wordpress.com/2018/12/18/bankruptcy-myths-debunked/

 

Call, Text or E-Mail for a free initial Consultation

It takes only 15 minutes

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LAW OFFICE OF LEAH E. CAPECE, ESQ., LLC

1338 NORTH AVENUE, ELIZABETH, NJ

313 AMBOY AVENUE, WOODBRIDGE, NJ

Phone: 908-353-6700 Fax: 908-838-9991 Cell (Text): 908-266-4843

E-Mail: lcapece@leclawonline.com

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*THE FOREGOING ARTICLE IS FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSIDERED OR RELIEF UPON AS LEGAL ADVICE*

 

 

 

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