Tuesday, April 14, 2009

Tuesday Tip

A quick, painless money saving tip every Tuesday

Change your tax withholding so that you are paying the correct tax each month and no more. My husband and I are getting a hefty refund this year, but that is mostly because we bought our house in 2008 and also because we did not change our withholding after our daughter was born. (Last year was a big year for us!)

While it seems really exciting to get a big refund, the excitement is an illusion - it was our money in the first place! As all the financial experts I read say, getting a refund at the end of the year is like giving an interest-free loan to the government. If you put that money in even a low-interest savings account, you would earn some interest on it, however small. Most importantly, you would have control of your own money, instead of having to wait for it until past the end of the year.

It might take a little effort to figure out the correct withholding, but it wasn't too difficult for us using our tax software. Of course, we do err on the side of caution, since we don't want to have to pay tax at the end of the year!


  1. This is SO TRUE. And such a common mistake! That money could be growing for you all year - in a low interest savings account, in a high interest retirement account (12 more months of interest is a LOT!), or just buying you something meaningful. Uncle Sam is the only one getting a deal!

  2. Absolutely, that tax check is not a bonus it is your money that could be invested throughout the year instead of letting the government hold on to it.

  3. Thanks for the tip. You are right I try not to receive to major of a refund but I am not the best saver so I do have the IRS hold out a little extra.


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