News Why You Shouldn’t Worry About a Big Tax Refund

Why You Shouldn’t Worry About a Big Tax Refund

-

If you follow personal finance blogs, you will notice that a lot of them give the same tired advice. One of those pieces of advice is “stop giving the government an interest free loan!” They tout the benefits of keeping the most money in your pocket as possible, and go on and on about how you should set up your deductions so that only the bare minimum is taken out. That advice is rubbish.

How Big is the Average Tax Refund?

For most Americans, a hefty tax refund is expected. And most American’s get to enjoy a check from Uncle Sam every year. The average is right around $3,000. That’s not a lot of money, but it is pretty sizeable. It means that you are paying about $115 extra every two weeks, and the government is holding onto that money before returning it to you. Sounds like a raw deal right? You’d rather have that money so you could invest it, or save it, or pay down some debt right?

Likely, you wouldn’t do that.

Big Refund versus Higher Paycheck

The consensus is split on which is better. And it all depends on your goals and what you want to do with the money you get back.

A higher paycheck sounds like a good idea, and you may have big plans to invest the money or at least save it in a savings account. But likely, if you get an extra $100 every pay period, you will spend an extra $100. You will find something to buy, eat out more often, get an extra drink at the bar, or anything but actually save the money.

A bigger refund, however, is easier to save. When all of the money comes in at once it is harder to spend it. So out of your $3,000 you can dump $2,500 into savings and still have $500 to blow on stuff that you want to buy. Your savings will end up higher than if you tried to save throughout the year.

But I Miss Out on Interest!

The average savings account yields around .5% interest right now. Let’s suppose you were able to put the entire $115 into savings every paycheck. That would mean you earned around $15. Even less because the full amount of money wouldn’t be in there from the start. Taking the time to save every pay period gets you a whopping $15 extra at the end of the year. Most likely you won’t put all that money into savings.

Save All at Once

Instead of trying to save every pay period, just let that big tax refund come in. Your savings and investments will be better off because of it, and you will never miss those few extra drinks at the bar, that extra night on the town, or that new pair of shoes every month. If you hire an accountant, you can get that refund even bigger too.

Why You Shouldn’t Worry About a Big Tax Refund
General Contributor
Janice is a writer from Chicago, IL. She created the "simple living as told by me" newsletter with more than 12,000 subscribers about Living Better and is a founder of Seekyt.

Latest news

Japanese Owl Meaning and Symbolism

If you're wondering about the Japanese owl meaning and symbolism in Asian cultures, the Owl, along with Maneki Neko...

What Are the Signs of Depression in Women

Gender and depression have long been the scope of research in the field of emotional disorders; most authors believe...

Top 7 Superfoods for Men to Stay Young

Superfoods are generally regarded as targeted foods that provide the maximum nutritional benefit - thus these foods are nutritionally-dense...

Best Brain foods for Kids – Boost Brain Power and Keep Sharp

A child's brain is developing rapidly and if you want them to improve their performance in school and their...

7 of the Best Brain Foods for Studying

The foods that you eat can improve the functioning of your brain. Just like drugs, foods have amino acids,...

B12 Shots for Dogs – 10 Key Benefits

The end of 2010, my little dog -- a 7-pound Papillon -- became very stressed after a flood in...

Must read

Why Eating Healthy Foods To Lose Weight Is Important

Eating healthy foods to lose weight is extremely...

Get Rid Of Hair Dandruff

We all hate Dandruff as it makes us...
- Advertisement -

You might also likeRELATED
Recommended to you