Tax Season: a phrase that usually comes with an instant headache and quick anxiety. Even though taxes can be a complicated and often scary process, you can do more with your taxes than you think.
Benefits with collecting your tax refund on a monthly basis, rather than a yearly basis
So, are you employed? If so, you probably filled out a W-4 form, which you fill out to show your employer how much to take out from your paycheck for federal taxes. You may be withholding additional funds from your pay check, making April 15 an exciting time with a large tax return. But every month, you are swamped with bills that have high interest rates, and that interest keeps building as time goes on. If you could receive more money back on each paycheck, you could pay off those bills faster, you could cut your interest pay and save hundreds even thousands of dollars. So instead of receiving a large sum once a year, adjust it so you receive it back on each pay check.
Fill out your W-4 form so your withholding corresponds to your tax liability, so you can take that money and invest it to something better. Instead of “lending” the Government money, keep the extra cash and use it to pay off credit card debt, invest, or simply put it in a savings account. Adjusting your withholding results in higher monthly income and allows you the flexibility you need on your finances.
Ways to spend your income tax refund
So, if you prefer your tax return once a year, how should you spend that extra cash? Over 70 percent of Americans will get money back at the end of the tax year, with an average of $2,000*. Instead of trying your luck in Vegas, or buying a nonessential toy to put in your garage, consider these:
- Invest! Let your money do some work for you, and invest in something. The stock market, for example, has a 12 percent interest rate, which can add up over time.
- Pay for repairs on your home or car.
- Make an extra home mortgage payment, which could save you money in interest down the road.
- Place more into your retirement account.
- Open a savings plan for a college education.
There are many beneficial ways to spend that extra cash. Just remember, a tax refund is an interest-free loan to the government, and its simply money you’re missing out on every month. Again, if you are receiving a large tax return each year, consider making some adjustments. You may feel your tax return is a gift, but remember, each month your interest is building, and your losing a chance to pay that off every month.
For more help with your taxes, please click here for more information and guidance. We have teamed up with TurboTax to make your life a little easier!