When you're making out your holiday shopping budget, don't confuse Santa with Uncle Sam.
Of those Americans who expect to receive a tax refund next year, 54 percent have already decided how they'll use that money, according to a new survey from Credit Karma Tax. (See chart below for a breakdown of refund uses.)
The site surveyed 2,094 American adults during October.
Millennials were most likely to be planning ahead, with 63 percent having a refund plan in mind, compared with 52 percent of Gen Xers and 42 percent of baby boomers. Women were also more likely than men to have a plan, at 57 percent versus 48 percent.
Financial experts say it's not a bad idea in general to have a plan for windfall money like a bonus or tax refund. That can help you prioritize — especially if they have a big financial goal they're working toward, said Kemberley Washington, a certified public accountant and co-founder of Washington CPA Services in New Orleans.
"It's good that individuals are thinking ahead with what they're going to do with their tax refund," she said.
But it's risky to make current spending decisions based on those plans, against funds you don't have in hand.
"This is the season of debt," said psychologist Kit Yarrow, author of "Decoding the New Consumer Mind."
It's not unusual to see people thinking of their tax refund as giving them leeway to purchase more now on a credit card, with the intent of paying that debt off in the spring, she said. That can easily catch you in a tough-to-escape debt cycle, especially if you incur interest charges or experience an unexpected bill that sets you back from zeroing out the balance.
Changes to your financial circumstances could mean you won't get the same kind of refund you have in previous years, said Susan Bradley, a certified financial planner and founder of the Sudden Money Institute in Palm Beach Gardens, Florida. Taxpayers may also encounter refund delays due to processes in place to prevent tax fraud.
"With the uncertainty, it's just not a good idea," she said.
Think of this as an opportunity to break the cycle, said Washington, who is also a member of the American Institute of CPAs Financial Literacy Commission. Stick to money you currently have for this year's holiday budget. Then, think about allocating part of your refund to next year's.
If you're counting on that tax refund for a big financial goal, now is also a good time to chat with your tax preparer and make year-end planning moves to minimize your tax bill and maximize your refund, Washington said.