Should You Save or Splurge with Your Tax Refund?

Written by Marty Orgel

How much do you want that "thing?"  Is it worth 4 times its price in 5 years? That's the question to ask yourself when you get a big tax refund. Should you spend it or save it?

Taking your tax refund and splurging could be good for your pocketbook and your psyche. If you've been hankering to make a major purchase, like a new house or a boat, this year's income tax refund check could get you going.

Some financial analysts recommend using a refund to pay off debt; others applaud the psychological lift of financing a down payment on a dream. 

"Heck, I own a boat," says David Avery, owner of Preferred Tax & Investment Advisors in Francestown, N.H. "If I was always sensible, I wouldn't own a boat." 

Avery says there's nothing wrong with shooting for the stars, and if your tax refund helps you get started, go for it. 

"It's your money. That's the beauty of financial planning. If you have everything all set up, it really doesn't matter what you do with that refund check. Splurge. That's what life is all about." 

So, let's say you dream of owning an Airstream trailer to take the family on holidays. 

A new Airstream trailer will set you back from $85,000 to as much as $250,000. Searching the used market, you can have one starting at about $25,000. 

The average U.S. income tax refund check is $1,200. Let's see how much you'd have toward your down payment if you invested that sum each year in interest-bearing accounts over the next five years.

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