The Big Pay Back...or is it?
Posted on November 17, 2010 by Kelly Griffie, One of Thousands of Money and Finance Coaches on Noomii.
Is it sensible to sacrifice all year for a large income tax refund?
In my life, I’ve not met anyone that says, “I just love paying taxes”. Usually, its the opposite. So it’s safe to say we don’t like to pay taxes. Then why do we overpay? In fact, last year’s average tax refund in the US was just over $3,000. While that may sound good to some, consider this. If you get paid weekly, you shorted yourself $57 every payday. If you charged something on a credit card during the year because you didn’t have the cash until payday, or if you (gasp!) went to a pay day lender, you likely paid interest on borrowed money, while overpaying the IRS.
I can hear you now, "but I use that as my “forced savings” and when I get the refund, I can buy the things I want." That certainly is an option, but what about saving the same amount, gaining a tiny bit of interest and knowing it’s available where you can get to it without waiting on Uncle Sam to dole it out? That sounds better to me, but how can we do that?
Use the tax withholding estimator at either www.irs.gov or www.paycheckcity.com. These will help you estimate how many exemptions to claim on your W-4 so that you can make the most of your money every day.
Happy Saving!
