“Should I spend or should I save… that is the question.”
We’re only human, and when we get a big chunk of change… well, it almost burns a hole in our pocket. Depending on your situation, you may get a sizable return from the government this tax season. As of March, the average American received a refund of $2,790. Not too shabby. But what will most people do with that refund? Well, you have options. If you’re in a good place financially, you can choose to put that money toward the repayment of debt, or even add it to your emergency savings or retirement fund. If things are tight, you can pay some bills. What you should not do is blow it on something frivolous – be smart and put that cash to good use.
Another thing to consider at refund time is adjusting your withholdings on your W-4 (or Employee’s Withholding Allowance Certificate.) Your refund is, essentially, the reimbursement of overpaid taxes. By adjusting your withholdings you put more money in your pocket each month. Let’s take a look at this using this year’s average return of $2,790. If you adjusted your withholding to cover anticipated taxes, you would put an extra $232.50 in your pocket each month. Sure, you would not receive a refund in 2014, but you would have more money at your disposal each month.
Talk to your tax planner to see if this is a good option. If so, visit your Human Resource Department to complete a new W-4.
Until Next time, I’m Thom Fox for Cambridge Credit Counseling Corp.