By Mark Davis
I am about to say something and before I say it, I need you to remember that this is a Christian publication. And since you are reading it you are probably a Christian, so please treat me with the love of Christ if I say something that you don’t like. Ok, here it is…
Getting a big tax return is a bad thing.
OK, I said it. Now before you say that I am crazy and just turn away from this article, hear me out.
When you receive a large tax return that means that the amount you are withholding from your check each pay period is incorrect. “So what?” you ask. Well, contrary to popular belief you are not receiving a gift from the government when you get a refund check. They are simply giving you back your own money.
This is the money that you lent INTEREST FREE to the government for one year.
How many institutions do you know that will lend you money for one year on an interest free basis? The goal is to not have too much or too little withheld from your pay. For help in calculating the proper amount of withholding you should put on your W-4 go to: www.irs.gov/individuals/irs-withholding-calculator.
So if that was not enough of a reason to validate what I said, let me ask you a couple of questions:
- Could you use more money in your paycheck each pay period?
- Who do you think can make better use of YOUR money, you or the government?
The average tax refund for 2012 was around $2800. If you divide that out over 26 pay periods that would be an additional $107.69. Boom, you just gave yourself a raise. Now what?
Alright, now given the timing of this article, I know that you cannot change whether or not you are getting a refund this year. So you have received this large sum of money. Here are a few tips about how to treat this increase.
Create more debt
Don’t use the refund as a down payment on a big ticket item that you do not need and that you will have to make payments on.
Shop till you drop
Once you have that money in your account the urge to buy out the mall is understandable. But remember we must be good stewards of any increase that we receive. Is a $500 purse or $2000 rims really how God wants you to use that increase?
Invest in a ‘Get rich quick scheme’
More than likely your cousin “Man Man” is not a reputable or licensed investment representative. Giving him $1000 to “flip” for you is probably not going to end well.
Give God His 10% before you touch the other 90%
Pay down debt
Pay off several small bills so that you free up that money monthly to put towards larger debt.
Create an emergency fund, college fund for the kids, investment account, cushion in checking account or retirement fund.
Get your side hustle on
Use your refund to start a business.
Buy something that can pay you back
Take a class, get a gym membership, give to a cause that you care about or invest in a home improvement that either increases the value of your home or creates a tax credit because it increases energy efficiency of your home.