Mistakes to Avoid When Handling Your Tax Refunds

Thinking that it's 'free money'

The way some folks celebrate getting a tax refund, you'd think it was a surprise windfall being given to them as a gift. I'm sorry to burst your bubble, but a tax refund isn't like a birthday check from your grandmother -- it's your money, and the government held onto it for a while because you overpaid your taxes. Now it's being returned to you, without interest.

Paying down low-interest debt

So you've decided to pay off some debt with your tax refund. This is a great idea -- owing less money to your creditors is an excellent feeling, and can save you quite a bit. (In fact, the average credit card APR was 21.47% as of November 2023.)

Blowing it on a purchase with expensive continuing costs

Considering buying a new car with your tax refund? (How big is that tax refund, anyway?) You might want to think twice. As anyone who's ever received a big repair bill from their auto mechanic can tell you, making a big purchase is often just the beginning.

Getting a refund at all

Honestly, getting a big tax refund at all could also be a mistake -- unpopular opinion, I know. But remember what I said earlier, about how a tax refund is your money that you should've had access to during 2023 from your regular paychecks?