If you are one of the millions of Americans who received a tax refund this year, know that getting a refund may not be in your best interest!
Don’t allow Uncle Sam to use your money interest-free!
Of course, during this time it is great to get a windfall, but you are only allowing Uncle Sam to use your money interest free throughout the year!
But why not change it up!
If you get a large refund, consider using the money to reach your financial goals, such as paying down debt.
The American Bankers Association estimates a family carries approximately $10,000 in credit card debt. If you are carrying high-interest debt, there is no better move than to pay off your credit cards first! This would in turn immediately save you money and generate instant returns for you.
For instance, if you have a credit card balance of $3,000 and incurring high finance charges, paying down this debt would actually save you a lot of money over time versus simply paying the minimum monthly payment.
You may also consider using the extra money you receive in your paycheck to invest it! This way you are not only putting your “would be tax refund” to work but making money as well!
Break even at tax time
While this may not always be easy, definitely do your homework! Take time to estimate your tax liability for the year. Review your tax return and find the line that says “TAX.” After making the determination, make certain your withholdings are matching this amount. If you do not know exactly how to determine your tax liability, consider speaking to a tax professional or using the IRS online tax calculator.
Update your withholdings
After you have reviewed your tax situation, it is a good idea to update your tax withholdings. This could be accomplished by contacting your human resource department. In many cases, you may be able to do it online. But more importantly, visit the IRS website and complete the W4 form to update your tax withholdings.
Remember: your choice, your future!
Kemberley Washington is a certified public accountant and owner of Washington CPA Services LLC. She is the author of many great books, some of her best sellers are 21 Days of Powerful Breakthroughs, It All Starts with a Budget, and The Ten Commandments to a Financial Healing! Follow her on Twitter, Instagram or Facebook @kemcents!