According to the IRS, through March 16th -- they have issued more than 65 million refunds worth over $188 billion for an average refund of more than $2,899.
If you are one of the many getting money back -- it may be tempting to go on a shopping spree.
But you can have fun and be financially savvy.
Certified financial planner Sarah Halpin has some suggestions on how to that!
Pay Off Your Credit Card Debt
Eliminate high-interest debt by paying off all or a large percentage of your credit card balances.
Using your refund to pay off a balance with an 18% interest rate is like earning 18% on your investments! Reducing or eliminating debt can also help your credit rating and improve your monthly cash flow.
Rebuild Your Emergency Fund.
Many people raided their emergency funds over the past year and have had little extra money to restore them due to rising food and energy costs. You could use your refund to start rebuilding you fund, which can help you avoid landing in credit card debt if you have an emergency.
You should have at least five to six months living expenses easily accessible in a money-market account or a savings account that earns interest as an emergency fund.
Make an Extra Mortgage or Car Loan Payment
Pay off your mortgage faster and reduce the balance on any car loan with this year's tax refund check. Reducing the loan balance on these accounts can also reduce your monthly payments, or at least shorten your debt repayment period. Making a larger, lump sum payment toward a mortgage or a car loan payment can also increase your net worth because you will be carrying less debt.
Boost retirement savings.
If you have earned income, you have until April 17, 2012 to contribute up to $5,000 to an IRA for 2011 (or $6,000 if age 50 or older). If your 2011 modified adjusted gross income is $122,000 or less if you're single, or $179,000 or less if you're married filing jointly, then you can contribute to a Roth IRA, which lets you withdraw the money tax-free in retirement. If you earn too much for a Roth, you can contribute to a nondeductible traditional IRA, then convert it to a Roth
Talk to your financial advisor and/or your tax advisor to see what makes sense for your situation.
Revise Your Tax Withholding
Though it might seem nice to get a refund, it actually means that you were giving the government an interest-free loan for the year.
Wouldn't it be better to have a bigger paycheck instead of lending Uncle Sam all that money interest-free every year? Use a tax withholding calculator and check with your employer to see whether you can adjust your tax withholding and give yourself an instant pay raise.