(MENAFN) As inflation rates continue to cause budgetary strain for consumers, financial experts suggest using tax refunds to offset the impact of higher prices. As of March, prices have increased by 6percent over the past 12 months, according to the most recent consumer price index. Meanwhile, just over half of filers (55percent) are expecting tax refunds for the 2022 tax year, with an average expected refund of $2,205, according to the 2023 Nerdwallet Tax Report.
According to financial planners, tax refunds can be used to unload high-interest debt, such as credit card debt. With rising interest rates, variable-rate debt becomes more expensive, making it more difficult for consumers to pay off their balances. Using a tax refund to pay off a credit card debt with a 20percent interest rate can provide an instant, tax-free 20percent return on that investment, according to Drew Wessell, a certified financial planner at Fiduciary Financial Advisors in Grand Rapids, Michigan.
Paying off high-interest debt can provide a protective barrier against inflation, enabling consumers to free up cash flow for other expenses. "Tax refunds are going to arrive at just the right time for many consumers this spring," Wessell said. For consumers struggling with debt, using a tax refund to pay off high-interest balances can provide a much-needed financial boost.
In addition to paying off debt, financial experts suggest using tax refunds to build up emergency savings, invest in retirement accounts, or fund home repairs or upgrades. By using tax refunds in this way, consumers can help protect against the impact of rising prices and ensure long-term financial stability.
Overall, financial planners suggest using tax refunds strategically to offset the impact of inflation and build a more secure financial future. While tax refunds may seem like a windfall, they are really just a delayed paycheck that consumers have already earned. By using these funds wisely, consumers can make the most of their hard-earned money and protect themselves against the challenges of an uncertain economic climate.
MENAFN28032023000045014228ID1105879568
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.