Thursday, March 31, 2011

Reasons to Spend Your Tax Refund

As if anyone needs another excuse to spend their tax refunds! According to financial expert, John Strelecky, using a refund to splurge is a good way to create happiness. Just make sure this falls in line with your life and financial goals…


    He says that after you consider today’s average returns and inflation rates, people are better off using their refund money to enjoy life today, instead of saving it for some vague future purpose. “The point of earning money is to create memories, have amazing experiences, and do interesting things,” he says. “Don’t wait until age 65 to start spending your money to live a rewarding life.”

    He makes a good point. As you weigh potential splurges, recent research suggests that spending on experiences, such as a family vacation, could bring more happiness than material purchases, such as a new washing machine.

    By comparing consumption data from the national Health and Retirement Study, Thomas DeLeire of the University of Wisconsin-Madison and Ariel Kalil of the University of Chicago found that spending money on leisure activities, which include vacations, movie theater tickets, and hobbies, improve happiness levels. (Happiness was measured by asking respondents to describe how they felt about their lives.) Expenditures on durable goods such as refrigerators, clothes, personal items, and housing, on the other hand, did not have an effect on happiness.

    The apparent reason behind the leisure spending—happiness connection is even more intriguing than the finding itself: Spending on leisure activities appears to boost one’s level of social connectedness. That makes sense, since when you go on vacation, engage in a hobby such as tennis or bridge, or go out to the movies, you are almost always doing it with somebody else. So spending on leisure might boost your social connectedness, which in turn improves your happiness level.

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