What Does it Mean to Get a Tax Refund?
When you get a tax refund it's because you overspent. You paid the government more than you were supposed to. I don't know about you guys but I don't pay any bills extra. So keep that same energy when it comes to your taxes too.
Your taxes based on your tax bracket we have a marginal tax system. I'm not going to bore you guys but the idea is if you are in the 22% tax bracket. Not all your money is taxed at 22%. I'm gonna put this title so you can kind of see how that works.
What your employer did was an estimated your taxes based off of what you put in your W4 forum and then that determines how much money is getting taken out of your check every single week.
When you get your tax refund it's because your employer it's about too much money.
You're Giving the Government an Interest-Free Loan
No.1 that I've already mentioned you're giving the government an interest-free loan okay it's bad enough that we're already paying all this money we don't really have any way to where the money gets you allocated to.
I'm giving you guys more money in getting less back because of inflation and I talk about inflation on this website a lot but inflation is a way to be taxed without actually having to have in legitimate tax right.
If they can kind of have inflation at 2% like they claim then every single year your money is becoming less valuable by 2% and we all know that things go up more than that.
I don't know where they get their calculations from but I was buying long situation one day and the next thing you know it decides we're in half and the price was still the same that's what the percent inflation okay not too.
When you couple that with just having to wait and you're not able to take that money and use it how you want to it doesn't really make sense together over any extra money and even if that wasn't the case I mean it's your money why would you not want your money even if it wasn't earning any interest even if you weren't doing anything with it it's still yours you shouldn't have to wait a whole year before you get what's yours rightfully back to you.
More Money More Problems
I'm not you guys were saying more money more problems for most people may be not you because you want to miss channel right but for most people when they get a big sum of money.
It's kind of good use for its moment and all of a sudden you're thinking about how much things you can buy and what new purchase you need and things you've been wanting for so long and you might go out to eat and you have that lifestyle creep temporarily while you have that money.
I think that's a natural thing when you see a whole bunch of money in your account. Naturally, you want to spend it it's a little bit too tempting when you get that chunk of money whereas if it was kind of spread out throughout the year.
It would be a normal part of your budget and you wouldn't have that impulsive urge to just kind of buy buy buy because it's just so much money you just get excited about what you can purchase.
I know most of you guys probably are already getting your w-2s maybe you never heard this before but for next year what can you do adjust your w-4 form so you don't get a big refund if you are the person who likes getting the big refund and you don't want your money throughout the year you prefer getting it all later that's on you.
n because it's gonna have a form you can fill out and it basically tells you how to flow your w-4 form after you fill out all those that pieces of information and you can give it to your employer.
What you'll see is you'll have more money in every single check now because you've made that adjustment to properly reflect how much when they should be getting withheld from your check.
If you want to get an idea more that's how your income will be looking like if you do make these changes take what you normally get out of your tax refund and divide that by 12 so let's say you get $3,000 back a year if you divide that by 12 then that would pretty much mean you get two hundred and fifty dollars extra every single month.
3000/12=250
If you do make these adjustments to w-4 that's a rough calculation you'll have to actually do these things with your employer to see what your real number is but they don't give you at least an idea of what to expect and then you can analyze do you prefer getting it every month or do you prefer waiting until the end of the year.
What Should you do with the Extra Money?
Whether or not you have chosen to do this what should you do with the extra money or with your tax refund Oh glad you asked no one's saying you have to deprive yourself and you can't treat yourself to a little something but let's try to be a little bit responsible for it.
Pay Down Your Debt
Pay down your debt even if you use only half you depend on your debt okay do something especially okay especially if you have credit cards because we all know credit card debt is lethal it makes no sense of how much they charge.
It just saying right you know what I mean you only get maybe a percent or two in your savings but then they'll flip it around and charge you upwards of 20% to borrow their money.
You can also get yourself a little Sumsum there's nothing wrong with that but try not to let that overtake the money you want to really focus some money on the better financially and the best way to do that is to get rid of your debt like I already mentioned.
Budget it out
Budget it out and this is regardless of whether you get in the money in a lump sum or you're choosing to get it throughout the whole year have a budget I have articles about budgets and if maybe you don't even need articles but just kind of list out.
What are your expenses?
How can I get that? What do I need to pay extra?
So that I can get out of this rabbit hole the day habit if you are paying off that the highest interest rate first because that's the best way for you to save the most money those are charging you the most you want to get rid of it the quickest.
Maximize your investments
Maybe you don't have that or it's negligible like something like I don't know maybe medical bills which don't have any interest rates at least from my experience.
You don't really care too aggressively to pay that down well invest and I'm sure you've heard this before but education is the best investment so if you want a business.
Get Educated
If you want to open up or you want to figure out how you're gonna get some more money and kind of pad your income research it by courses get into some classes take some online seminars webinars whatever they're called and get educated because you should not be trusting one employer to finance your whole life you do not know what's going to happen tomorrow.
They can fire you you can decide you don't want to be there anymore and you need to make a plan so that you have money no matter what I have an article about quitting your job responsibly or even if you get laid off how to prepare yourself in the event of any type of change with your income so check that out.
