Seventy-five percent of those reading this post will receive or have already received a tax refund for the 2014 tax year. Being that the average tax refund is around $2800, that’s an additional $233 a month of income you may be missing out on.
Those who decide to pay more taxes on a monthly basis in order to receive a refund do it because they know they would otherwise spend that money. Taxes can be a good way to ensure that you don’t spend that extra money on frivolous items. The only problem with this logic is that you’re letting the government keep your money – interest free!
In fact, the best tax refund is no refund at all. You could give yourself a raise by simply adjusting your tax withholding and designating that $200 a month to eliminating debt, saving for your rainy-day fund, or letting it build interest in a savings account.
If you’re interested in increasing your take-home money, here are a few things to think about:
Consider adjusting your tax withholding so that your yearly refund is only a few hundred dollars, and not a few thousand. Use this additional sum of money every month to pay down your debt. Once you eliminate that bill, apply this amount to the next bill in line.
If you’re afraid adjusting your tax withholding because you may spend that extra income, ask your employer to set up a direct deposit account so that those funds are automatically deposited into a separate account. Use this extra money to build your emergency or rainy-day fund.
Not sure about how much money you should be withholding? Try using this simple tax calculator to optimize your tax withholding.
If you did receive a refund this year, we’d love to hear what you plan to do with it! Comment below and tell us your plans!
Interested in using some of your refund to eliminate outstanding debt or late payments? Receive a FREE financial analysis with your FREE Mvelopes account.