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::FEBRUARY Edition::

Welcome to the February edition of Financial Friday, Oklahoma Money Matters' online personal finance question and answer forum. This month, we’re answering a question about tax refunds.

Tax time is approaching and I can’t wait to get my refund. Recently a friend told me that getting a large refund isn’t a good thing. Can you tell me why?

For many people, tax refunds are something to look forward to. Why wouldn’t they be? It’s exciting to imagine all the things you’ll be able to do with that money. As much fun as it is, your friend is right – getting a tax refund isn’t ideal. If you receive a refund, it means you’ve had too much withheld from your paycheck.

That means you’ve essentially given Uncle Sam an interest-free loan on money you could be using every month to pay bills, buy groceries or get closer to your financial goals! Instead of aiming for a refund, a better strategy is to try to break even – ideally, you don’t have to pay the IRS and they don’t have to pay you.

First, figure out how much you should actually be withholding. Grab your last pay stub and explore the IRS withholding calculator to help you determine how much tax should be withheld from your paycheck.

Next, talk to your employer’s HR department as soon as you can to adjust your withholdings by completing a new W-4 form. This one step could mean more money in your pocket every month; that’s like giving yourself a raise.

If you’re like many people who use their annual tax refund to kick-start their savings or pay down debt, it’s important to know there’s a better way to maximize your money. Instead of waiting for the IRS to write you a check at tax time, take full control of your finances by cutting out the middle man. Once you’ve adjusted your withholdings, continue living off the monthly amount you were previously bringing home and put the “extra” to work for you.

If paying down debt is your goal, commit this money to debt reduction by implementing the debt snowball. If padding your emergency fund ranks high on your priority list, consider having this “extra” income automatically deposited into an interest-bearing savings account at a bank or credit union and watch your money grow. This time next year you’ll have a nice amount saved, plus the interest it’s earned.

For more information about income taxes, tax forms and withholding, visit

As always, if you have money-saving tips you’d like to share, send us an email at or submit a personal finance question for a future edition of Financial Friday.

Thanks for participating in Financial Friday. It's never too late to take control of your financial future!

The OKMM Team

Financial Friday is a service of Oklahoma Money Matters, the financial literacy initiative of the Oklahoma College Assistance Program, a division of the Oklahoma State Regents for Higher Education.

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