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January 01, 2006

How To Get An Instant Pay Raise

How To Get An Instant Pay Raise

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.

If you need help ask your payroll administrator at work or an
accountant.

Keep your money working for YOU!

*****************
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 readers of this blog at:
http://www.1shoppingcart.com/app/?Clk=1270346

Posted by Willie Crawford at January 1, 2006 05:26 PM

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