Would You Like an Extra $200 Per Month?

Did you receive an income tax refund last year? According to the Principal Financial Well-Being Index, 84% of the workers surveyed were expecting a refund on their 2005 state or federal taxes.

With the average American household carrying about $8000 in credit card debt, the average tax refund of approximately $2500 could eliminate over 30% of that household credit card debt. Unfortunately, many people view a large tax refund as a windfall and rarely spend it wisely.

If you are carrying any type of debt, can you really afford to provide the United States government a no interest loan each year? When you receive a tax refund, that is exactly what you are doing. The average taxpayer has overpaid their taxes by more than $200 per month.

By adjusting your tax withholdings by filing a new W-4 form with your employer, you will reduce the amount of taxes taken out of each paycheck. On average, that would mean an extra $200 or more in monthly income. That money would then be available to make extra payments towards your credit card bills or other debt.

Take the time to review your current tax withholdings and make any necessary adjustments so you can increase your monthly income. If you are not sure how much you should have withheld from your paycheck, the IRS has a tax withholding calculator to assist you.

Think about how much sooner you will be able to eliminate your debt when you stop loaning the government interest-free money and use that money every month to reduce your high-interest debt.

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2 Responses

  1. Great information for sure. I do recommend to some of the people that we financially counsel that it is good to overpay, but with other types of people they need to get that money back.

    It certainly depends on the person.

  2. mnc says:

    You are correct, it does depend on the person. Unfortunately, it is often the people that need the money the most that are unaware they can adjust their withholdings.

    To make things worse, some of these same people then use the services to get an advance on their refund because they need the money quickly. So not only are they missing out on the money throughout the year, they then pay a ridiculous fee to get that money back quicker.

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