American consumers seem to be debating themselves whether to save cash or pay down debt with their tax refund or work-related bonus. According to the new Capital One Bonus & Tax Survey, 41% of respondents said they’d rather save their tax refund while 40% said they’d rather pay down debt and make needed purchases.
So what should we prioritize?
“Rich Bitch” author Nicole Lapin says there’s a clear choice between these two good options, in a recent interview with byteclay.com. “Knock out your debt first, and then turn to savings,” says Lapin, who has served as news anchor on CNN and CNBC. “There is no point maxing out your retirement contributions if you’re carrying a lot of debt elsewhere. Focus first on paying down high interest rate loans and then start stashing any extra money into savings.”
It turns out that most people like to be pragmatic when it comes to their money. Nearly two-thirds (65%) of respondents believe the best way to spend their tax refund is to be “practical.” And women (70%) are more likely than men (54%) to be “practical” with their bonus money. “As women, we tend to take on the entire world on our shoulders: our job, our friends, our relationships,” says Lapin.
The Virginia-based company is also creating digital and mobile applications so consumers can have financial tools while on the go. “Capital One is helping reimagine the banking experience by bringing banking and living together, while also offering top-rated digital and mobile tools designed to simplify everyday transactions so you, as the customer, can always be on top of your finances,” says Lapin.
Earlier this month, it rolled out CreditWise, a free mobile app — the first of its kind — that provides the general public with credit score updates using data from TransUnion, one of the three large credit reporting agencies in the U.S. These initiatives show that the financial sector is gradually moving its presence to where consumers are spending their time: smartphones.
Nicole Lapin suggests that consumers may want to consider saving money but to leave room for the occasional personal treats. “I like to think of a financial diet like a food diet …. I think too often people try to cut everything out when they try to get their financial lives in order. I’m a big believer of small indulgences.”
The same survey finds that more than half (51%) of respondents say they feel good about spending their tax refund on the things they need, while almost a quarter (23%) admit that they wish they could spend it on the things they want.
Money isn’t only for saving for a rainy day or buying items — it can be used to develop yourself. “I’m all about being practical and I encourage people to use some of that bonus or tax refund money to pay down debt, invest in yourself by learning a new skill, or save for living out your days in style down the road—as long as 10-15% of that amount is set aside for FUN,” says Lapin.