Tax Refunds are BAD for your Financial Health

The sun is out, the sky is bright blue, the birds are chirping and everybody is feeling good. I assumed this overwhelming sense of joy in the faces of my co-workers was due to the beautiful spring weather, but on a second take I noticed many co-workers in new clothes talking about upcoming vacations, new furniture and even grand plans for a European vacation. Suddenly I realized it wasn't spring in the air, these suckers just got their TAX REFUND. I am perplexed by all of the people who are bragging and "high-fiving" over how big their tax refund is this year.

Hello, dummies. If you are getting a refund, you just gave Uncle Sam an interest free loan for an entire year! I don't even give my favorite brother a loan (with or without interest) and you are going to give some uncle you have never met a loan for over $2,000 without any interest? That's right, the average refund is about $2,400 this year. If you did get a refund this year, please run (do not walk) to your HR office and get a W-4 and change your witholding amount or get the form from IRS.org.

Since this is the last year you will be getting a big refund check, use the money wisely. The best thing to do is to save the money in a Roth IRA. You can contribute up to $4,000 per year and the money grows TAX FREE. You can always withdraw the contribution amount without penalty. Not everybody qualifies, so check with your accountant.

If you have credit card debt or car loan over 10%, please put your refund towards paying down this debt. It just doesn't make sense to continue paying high interest rates.

The absolute worst thing you can do with any refund money is to blow it on something frivolous or on things that will not make you money in the future. This means big screen T.V.s, cars, furniture, vacations, etc., etc., etc. are all out of the question. For many people, tax refunds are like a big bonus. You should use it wisely to get ahead in life. Good luck and make sure you change your witholdings today so next year you won't have to read this blog entry again.