Getting a tax refund can really boost your finances, and give you the opportunity to pay off debt or perform home repairs. But, not everyone gets a tax refund, some people end up owing more taxes at the end of year and so miss out on the benefit of having extra cash hit their bank account in the Spring. Then, there is that small group of people who break even, neither receiving a refund nor owing. So, which is best? If you had a choice, and you do, on how much is held out of your paycheck, which method is best for your finances?
Some financial experts say getting a big tax refund isn’t always a good idea. Here’s why:
● A large tax refund means you are having too much held out of your paycheck every two weeks.
● When too much money is held out of your paycheck, that means less money goes in your pocket.
● Allowing a large amount of funds to be withheld, and then repaid to you every year by the IRS, is essentially allowing the IRS to act as your savings account. The only difference is that the IRS is not paying you interest.
Perhaps a better choice is to find an amount that allows you to break even tax-wise, and put the extra money in a sound investment. There is no reason to let the government hold onto your money rather than have your money work for you. Other common money mismanagement practices include failing to make and stick to a budget, spending more for a product than it is worth, and forgetting to save for a rainy day. You should also take advantage of all the free money available to you, like maxing out your retirement plan by getting the full employer contribution possible. Call us for advice on how to take steps to make sure you are doing all you can to manage your money properly.
Call a Plantation, Florida debt relief attorney today for more information about money management techniques. Schedule an appointment to learn more.