Pet Peeve: Tax Refunds

You may be looking at the title and think I am crazy. How can getting a Tax Refund be a Pet Peeve? Doesn’t everyone like getting a refund?

This time of year, I see so many friends get so excited for their tax refund. I makes me want to bang my head against the wall in frustration.

Why? Because they are just getting their OWN money back from the Government.

They could have had that money ALL year working for them, instead of giving an interest free loan to the government. Yes, you could have had it all year, instead of waiting for the government to give you YOUR money back.

People often tell me that they don’t have extra money to save/invest each month. I ask them if they are getting a tax refund each year. Yes, they get a big refund each year. *bang head against wall* I tell them they could simply increase their withholdings, get that money each month, AUTOMATICALLY put that money into savings/investment.

They key is to set up an AUTOMATIC savings/investment of that extra money, so you don’t see it each month and spend it! Then come tax time, you already have that money sitting in an account earning interest or earning money in an investment.

Now if you are terrible at saving money and would just spend it, you are probably better off letting the government keep it for you – like a forced savings.

However, I hear many people say they are going to pay debt off with it. HELLO! You could have been paying off that debt all year with the extra money, saving yourself the money that you are paying in interest. If you have debt and are getting a tax refund – stop it! Get that money each month and pay down your debt with that extra money each month, saving yourself so much in interest!

So 2 reasons you should be getting a refund: You are terrible at saving (let the government do it for you) or if you are like us, get bonuses or your company won’t allow you to increase your withholdings any higher. We are in this second category. When my husband gets a bonus, we are taxed at the highest rates available, no matter our withholdings. Also, for our taxes, his company will NOT allow us to increase our withholdings any more than we already have. *sigh* With all our kids, house, etc. etc., we could use higher withholdings, but we are simply stuck by his company’s restrictions. So EVERY year, when we get a big refund, I complain that I could have been putting that money to use all year-long. I love investing and saving, so I would love that extra money each month.

So if you get excited about a big tax refund each year – It is just your money that the government is giving back to you. Does that make me a kill-joy? Sorry…. Unless you are terrible at saving or are limited by employers, get your money every month and automatically set up a savings/investing plan for that money – especially if you are in debt. It may make February/March/April less exciting about getting a big refund, but instead you can have a healthy savings account year round (or less debt and less money wasted on interest)

Do you like getting a refund? Maybe I am just one of the few that gets irritated about this. I think if people understood they are just getting back their own money they overpaid to the government in an interest free loan, they may feel a bit differently about that refund…. Just some food for thought….

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