Nobody likes taxes, including me. But for some, this time of year is when they get their annual “bonus” from Uncle Sam – Their tax refund check.
If you’re getting one, GOOD! …But not really.
It’s important to understand that a tax refund check is basically the government giving you money back that you earned the previous year that you should have gotten in your paycheck.
Remember when you started your job and you filled out a W-4 form for withholdings? The higher the number of allowances you put down (for you, your spouse, your kids) the less money the government withheld each month, which would mean you would get to take more money home in your paycheck so you could, you know…LIVE.
If you don’t put enough allowances down, the government holds more of your money – you loan it to them with no interest – and then they give it back to you the following April.
If you’re struggling month in and month out to make ends meet but you’re expecting a big refund this year, there’s a fix for that:
1. Adjust your withholdings – It’s as simple as doing a new W-4 form at work. Your HR department should be able to calculate your proper withholdings with you.
2. The end game should be ZERO – No big refund but no taxes to pay either. This will allow you to get the maximum amount in your paycheck to live each month.
3. Get on a budget – When you tell your money what to do, it behaves. You’ll feel like you HAVE more, and your money will go further.