Stop Making Interest-Free Loans
We all love a big refund check… but what does that refund really cost you? If you have $12,000 withheld from your pay and your federal tax bill is $8,000, you get a $4,000 refund but you also made an interest-free loan to the government. And along the way you lost the opportunity to benefit from your own hard-earned money. If the thought of writing a check at tax time makes you uncomfortable, reduce your withholding amount and try to keep your refund to 10% or so of your eventual tax liability; that way your money can work for you throughout the year. If you get a $4,000 refund, that works out to more than $300 per month in additional withholding. Even if you would only have put that money in a savings account, you still lost the opportunity to profit from investing your own money. Don't let your money work for someone else make it work for you.