Waiting For Your Tax Return?

Waiting For Your Tax Return? – by Alex Giannetti

I used to be like many Americans during this time of year. I couldn’t wait until January 31^st so that I could get my W2’s from my job and a 1098 from my mortgage company so that I could file my taxes and get my refund. We used to get on average about $4,000 back each year.

In 2008 however I had an epiphany about my tax refund. All this time I could have had about $400 more take home pay each month instead of loaning it to the government. At the time I had accumulated $42,881.75 in credit card debt and was struggling to make $1,000 payment each month. I was thrilled to plop down that refund on my credit card balance but if you do the math I would have been much better off paying $400 more per month to bring that balance down throughout the year.

Receiving a large tax refund is only a symptom. It’s a symptom of not having a real plan. Most people use their tax refund for one of the following: to pay off Christmas; to buy something they really can’t afford; to go on a ‘well deserved’ vacation; or to get ‘caught up’ on bills. If this is you, then please pay close attention.

If you have read any of my articles you know that I am a huge promoter of Dave Ramsey and his teachings as it relates to handling your personal finances. I have been teaching folks to create their budgets by spending their money on paper before the month begins. When you do this, you basically give every dollar a name. Everything then that you can squeeze out of your budget goes to paying off your debt. $400 in anyone’s budget is huge. Imagine the dent you can put into your credit card bills, car loans, and student loans when you have an extra $400 a month.

Now just because my number was $400 doesn’t mean that your number is. Your number may be even higher. Here is what you need to do. First, you need to make a commitment to get your finances on track. I would strongly suggest taking an FPU class as a start.

Next, talk to your tax professional and find out what to do so you can break even at tax time and maximize your take home pay. If you have a real budget that works (like the one I teach people to use), then the extra money will go to eliminating your debt, saving for retirement, or paying your house off early. I have to warn you though, that if you don’t have a plan, then your money will disappear and you will have no clue what happened to it. Sound familiar? According to the Wall Street Journal, 70% of Americans live paycheck to paycheck. Are you one of them?

You are always welcome to contact me with comments and questions. You can find me at www.ChinoHillsMortgageMan.com