Now that everyone’s W-2’s are out and the majority of us have filed our taxes for the year. What was your refund? Did you even get a refund or did you owe money? If you got a refund some of you might not be too happy that it wasn’t as much as you would have liked. While others who received a larger than expected return are no doubt very happy.
The truth of the matter is, you really don’t want a large tax refund. The closest to zero you get come refund time the better. The larger your refund, the larger amount of money you let the government hold onto for the year interest free. While you may have been struggling throughout the year paycheck to paycheck while good old Uncle Sam took more than he was supposed to. That little extra money could’ve really helped you if you needed it. Now don’t get me wrong. Lump sums are very nice, but with the correct money discipline, you could’ve saved that little extra money that the government was taking or invested it.
Now if you didn’t receive a refund or if you received a substantial amount then you are going to want to adjust your W-4 forms from your employer. If you received too much then you may want to adjust your dependents number. I personally claim 0 although I have 3 dependents. They take a little more each check but I am almost guaranteed that I won’t owe anything come tax time. And the opposite if you got way too much back. Just claim more dependents (if you have them of course) so they will take less out of your check so you can pocket more of your hard earned money.
Now what did you get back from your refund? For example, say you got $3,000 back. Now subtract $500 just as a buffer. So say you got $2500 back. Now divide that by 52 weeks. That equals roughly $48. That’s $48 you can have extra every week to help pay bills throughout the year rather than getting it all back at the end of the year. Like I said, lump sums are nice but not if you have to live paycheck to paycheck just to get it. So adjust those W-4’s and stop giving the government YOUR money interest free!