Debt Control Begins with Salary Management
This is an exciting time of the season for a lot of Americans, as income tax time comes closer. No, most people are not too excited about submitting their income tax return, but a majority of individuals get a refund each year, and this year that reimbursement averages out to a bit more than two thousand dollars. That cash is ordinarily immediately used on a brand new TV or a family vacation or as a deposit on a new car. The majority of Americans seem to view their tax refund as some sort of prize, rather than cash that should be put to work to boost their fiscal health. Tax refunds are seldom spent sensibly, which is a disgrace.
The typical American household holds nearly $10,000 in credit card debt, and that $2000 or so might help a lot towards paying back that credit card debt. Of course, few people will look at it that way, as such a large amount of money just seems better suited towards some big purchase. But what if that two grand was in your wallet the whole time? Could you do something wiser with it?
The tax refund that a majority of people get every year is simply that; your money back. This means that the taxpayer paid out more money in income taxes than he or she owed, and for the average citizen, that works out to about $170 monthly. That cash has basically been lent to the federal government, interest-free, for a year. With many people deeply in debt, who can truly afford to give the federal government cash interest-free for 12 months? Could not that cash go to better use all year long?
Obviously it can. That money can be used every single month to reduce debt. If people would simply modify their tax withholding by filing a new form W-4 with their employers, the amount of income taxes removed from their pay could be reduced accordingly. Meaning, an average of, an extra $170 per month in the paycheck. And that money would be accessible to to remit additional payments on those monthly charge card bills. It is a much cheaper and easier way to reduce debt than to go through a complex and pricey debt consolidation plan. Sure, the government has huge deficits and requires money, too. But you need to look at your own financial needs first. That means dealing with that personal debt. Lowering your withholding is a good initial step in that direction.
The W-4 form allows tax write offs for each dependent child and offers considerations for employees who are married. Every time that status changes, employees should reevaluate their income tax payments and fill out a new form to account for the changes. For those who have no idea just how much ought to be withheld out of your paycheck, you may go to the Internet site of the IRS and check out their tax-withholding finance calculator. There is no reason to lend without interest cash to the IRS when you could be making use of that money to pay back your bills that are accruing interest at 20% per year. The money you earn with each paycheck is yours to do with as you desire as is the money that you receive through your income tax refund. Still, for your long term economic health you should use your cash sensibly.
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Perry Monkhouse is an online marketer with a decade of experience. He has written articles on a wide variety of topics of interest.
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