Financial Focus: Psychology of tax refunds

12:34 PM, Apr 04, 2019

COLORADO SPRINGS – Taxpayers could potentially receive thousands of dollars for their tax refund.

It’s a good chunk of change and something that everyone views differently.

Our partner at Carlson Financial explained the psychology behind refunds and why you need a plan for how to use this money.

Carl Carlson, CEO of Carlson Financial, said, “There’s a little bit of psychology about tax refunds and you need to think about that.”

Carlson said the average tax refund is about $3,000 and it’s a wide range for how people use it: some save while others want or need to spend it.

Ed Barry will be using his refund to “pay health bills, hospital, doctors.”

No matter which route people go Carlson said, “Figure out really what it’s going to be or at least estimate it and expect it, and then have a plan for what you’re going to do with it ahead of time.”

It’s something Carlson wants people to do before that money even hits your account.

“It can burn a hole in your pocket real quick once you have it.”

A lot of people can blow their extra money on things they don’t need when it would be wiser to invest or save it.

Carlson’s suggestion is to take some time to look at your financial situation and figure out what’s best.

“One thing is it depends on how are you coming as far as funding your retirement?”

If it’s not great, consider putting the refund into that account.

“Now if you have over-funded your retirement then yeah, sure, go spend it, enjoy it.”

Or – save half of it and spend the rest.

Carlson said there are software programs that will tell you right away if you’re going to get a refund and how much it will be. You can also get help from a tax accountant.

Carlson Financial is a sponsor of Financial Focus.

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