Debt Reduction Help
How to Get an Instant Pay Raise
by
Leo Quinn
As a gentleman was leaving my class recently, he wanted me to clarify
something I had said. He was making sure that he should take his four or
five thousand dollar tax refund and pay off debt.
I was stunned. This money represented $400-$500 that could have been in
his pocket every month. A survey of my friends this week revealed one
who was getting back $2800 and one getting $3300 back this year.
Getting a large tax refund (over $500) means you are having too much
money withheld from your check every pay period.
Many people use this as a forced saving plan and it does not make any
sense. You are loaning the government YOUR money, interest free. Every
$1200 in refund is an extra $100 per month you could have used to
eliminate debt or invest for your future.
I 'd venture to say that most people who do get large refunds could use
this money every month to ease their debt burden. This burden frequently
leads to late charges and higher interest rates. Instead, they like the
feeling of getting that big check in the mail and figuring out how to
spend that chunk of money.
The ideal situation is to either owe or get back $100.
If you get a big tax refund then you should adjust your allowances. The
more allowances you claim, the less money is withheld from your check
for taxes. It generally does not matter how many allowances you claim.
If the government gets it's money they really don't care how many
allowances you claim.
Here is how to get it right. Take the time to complete the appropriate
worksheets included on Form W-4. The worksheets will help you determine
your withholding allowances based on your income, adjustments,
deductions, exemptions and tax credits. The worksheets can help you
figure the right amount so you don't have too little withheld.
The IRS now has a calculator on their website which you can now access
anytime at: http://www.irs.gov/individuals/article/0,,id=96196,00.html
If you need help ask your payroll administrator at work or an
accountant.
Keep your money working for YOU!
About the Author:
About the Author:
Leo J. Quinn, Jr. is a financial educator from the Albany, NY area. For
the last eight years he has been stunning audiences by showing them that
paying off their highest interest rates debts first and/or paying extra
on more than one debt is often the SLOWEST way to get rid of those
debts. He has a
special offer for Momscape readers here.
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