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I know what everyone says, "A refund means you made an interest free loan to the government!" And they're right, but really, have you seen interest rates lately?
I'm not here to argue that their opinion or facts are completely wrong, to be honest, they're pretty much spot on. But that doesn't mean it's the whole story. I'm here to reassure you that you shouldn't feel guilty about the big refund, and I'll tell you why. First, however, let me tell you when a big refund really would be bad:
If you're really struggling to make your monthly bills, barely getting by paycheck to paycheck, but get a big refund, you really should adjust your withholding to cut down the struggles. Beside that, here are a few reasons it's okay:
1. Interest rates suck. If saving the money for a big purchase is your plan, you really aren't losing much letting the government keep it and getting it on your refund. If you're saving for long term things like retirement, then you should get it in your paycheck rather than the refund, but if it's short term goals, there's not much of a difference. Combined with a few more of the following reasons, you can make a compelling case for a big refund.
2. Most American's (myself included) suck at saving. We tell ourselves that we'll save the money, and maybe we even set up an account to do it, but it's there. Mocking us. Tempting us. So we spend it! Or even more likely, we never get around to setting that account up, or we end up "needing" it for "just this one time", and next thing you know, we've saved butkis!
3. Getting a big refund is a good way of ensuring you can catch up if you have a bad year with bills. You get a little behind because, as most American's, we're not really great at budgeting. The credit cards build up a little more than we wanted, and maybe even get a little hard to pay, then BAM! It's refund time and we can do a reset. Now I'm not recommending this as a planning method, but, I see a lot of reality in the tax office, and this is a big helper for a lot of people.
4. It's really difficult getting a small refund without ending up going too far. I can say with absolute certainty that virtually every person I do taxes for would consider a $500 balance due as nearly end of the world bad. It SUCKS owing the government money. Even the ones who want to get a small refund would rather get too big a refund than owe one thin dime! Trying too hard for a small refund risks the evil balance due.
So relax. Tell the naysayers to mind their own business. If you want a big refund, that's fine with me.