Friday, April 10, 2015


Many Americans are looking forward to getting a refund on their taxes, which has become an annual ritual for many.

We are so accustomed to this that businesses have long since capitalized on this particular phenomenon.

Car dealers will let you drive off the lot with only your refund as a down payment.

You can borrow money with an “anticipated refund loan.”

TV ads encourage us to come spend our refund on this, that, or the other ‘necessity.’

I get a kick out of the second one mentioned--the "anticipated tax refund loan." Essentially, the person who falls for this one has loaned the government interest-free for a year, but they are in such a hurry to get it back that they borrow money at a ridiculously high interest rate. When the refund comes in, they owe much more than the refund check is good for.

I hear people say that they intend to do something worthwhile with their refund like pay off a debt or put it into savings.

My experience with these people, however, is something else entirely.

The intention was sincere; but when the money showed up as a ‘windfall,’ it usually was spent on something “we really needed.”

I doubt that even in a recession such as now anything will be much different.

When money shows up outside our regular paycheck, it usually triggers the “want” button in our system, and the money is gone before the check has cleared the bank.

What should you do with your tax refund?

If your refund is consistently more than $300, you should change your W-4.

Why? Because you have loaned the government $300 interest-free for a year.

Of course, in today’s economy (2015), if you put the same amount in a bank savings account, the return is almost the same—30 cents.

Let’s consider, though, where you are in reality with your finances. Let’s stay with the $300 refund amount. (you can plug in whatever numbers are true for your situation to get a clearer picture.)

A $300 refund means you are giving the government an extra $25 per month that you could be using for yourself. That translates to $5.81 per week.

The weekly amount does not sound like much, but, if you are a smoker, that is a pack of cigarettes.

If you are a high-end coffee addict, that is a large latte.

If you frequent your local tavern, that is two beers during happy hour.

If you’re a single mom trying to make ends meet, it is a fast-food meal for yourself.

Each of those things, to be sure, are extra expenses that probably should not be in your budget; but I am aware of the human condition and its propensity to indulge.

From the indulgent standpoint, $300 once a year certainly gives you better opportunities than only $5.81 per week.

However, if you are struggling to make ends meet as so many are these days, think about the extra $25/month that is available to you.

That almost pays a cable-tv bill.

It’s extra gas in the tank.

It’s almost a movie rental every night, or a trip to the theater once a month.

While I do not condone nor recommend an indulgent lifestyle, I recognize where people are when they are always straining with their finances. There is a sense that creeps in that whispers, “You deserve this” whenever extra money shows up.

So, that is where I begin when I am working with clients trying to help them get to a positive cash flow in their life.

Begin where you are.

Get rid of the refund by changing your W-4 status.

Whatever the weekly/monthly amount is, you will have the opportunity to do something with the money on a regular basis that could possibly change things for your family.

One last thing: an extra $25/month is more than enough to start your own business from which you could begin to earn even more money to add to your family budget.

Any and all comments, critiques, questions, or criticisms are welcome here. Your response does not require my approval before being posted. While I certainly appreciate your comments on Facebook, I would prefer that you also leave your comment here, just below this article. There are many people who do not visit Facebook, and cannot join in any discussion that may be generated by your thoughtful insight. Please consider leaving your response below--either through words, or simply checking the appropriate box that equals your reaction. Thank you.

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