Do you want your money now or later? Recently, I was introduced to a person writing an article about budgeting and they asked, “What is one thing that a person can do that would have a $300 per month impact on his budget?” That was a hard question for me because honestly most people don’t have single budget items, besides their house, car, or insurances that cost more than $300 per month. Take cable for instance; cutting out cable would have a positive impact on the budget, but I really, really hope you are not spending $300 per month on cable! So, cutting out the cable all together still wouldn’t swing the budget by $300. I thought about this for a while and came up with some ideas that all kept pointing back to taxes.
In 2016, the national average individual tax refund was $3050.00*. That means, on average, the American worker over paid their tax bill by $254.17 per month! Yes, I know it feels awesome when you finish your taxes and realize you are getting money back, but that is like your boss saying, “We are giving everyone a $3,000 bonus this year, but your monthly income is going down by $250.” Would it still feel like a bonus then? Simply put, adjusting your tax withholding could put $250 a month back into your budget! What could you do with that extra money?
Over paying your tax bill feels good only once per year. Adjusting your withholdings to increase your monthly take-home pay could have huge benefits on your long-term financial success. When you are trying to get out debt, build emergency funds, save for college, or prepare for retirement, an upswing in the monthly budget by that much could be huge. If you’re nervous about it I encourage you to talk to a professional – maybe start with the person that does your taxes and then make an adjustment. If you find that you really miss giving interest free loans to the government, then I’m sure they would be happy to have you over pay again later.