The Tax Refund: Is it a Good Thing?
Simply put, a tax refund is the United States government returning money back to you that you paid through your paycheck. That's right, it's your money. They are just saying well we took too much so here have it back. You have in effect given the United States government a 0% interest loan with your money.
What do you plan to do with your tax refund? There are two options for your tax refund; save it or spend it. The wise course of action would be to sock it into a high interest money market account as an emergency fund. You can put it into your IRA assuming you haven't already maxed out your annual contribution. You can buy a certificate of deposit from your bank. There are many options on how to save your money. Banks out there are vying for your money right now. Shop around to find a decent interest rate. You also want to consider just how liquid you need this money to be. If it is going to function as your emergency fund, you won't want to put it into a certificate of deposit and make it untouchable.
The other option is to spend it. The smartest way to spend this money would be to pay down existing debts. You can use this money to jump start your debt snowball program. The money you save in interest and monthly payments is worth it. The other option would be to blow it at the mall. That big screen TV may seem like a good idea but stop and consider how much it's really costing you.
What's the smartest thing to do with your tax refund? Don't have one. You can contact your human resources agent and ask them the procedure for adjusting your W-4 to accurately reflect the amount of taxes that should be taken out of your check. Then you can sock that money away into a savings account and let it earn interest. Then next year when everyone else is getting their money back, your investment will have made you even more money in interest.
Published by Rachel Soden
Working on the Internet provides a unique set of challenges and victories for every freelance writer, Internet marketer and entrepreneur. The biggest challenge people must overcome on the Internet is marketi... View profile
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