If you’re getting a really big tax refund this year, I’m not trying to take the fun out of it…and it is nice to get a chunk of money…but it’s really not the best way to go about it.  When you get a big refund, it’s usually because you had too much money withheld from your paychecks.

What do you use it for? A lot of people pay down credit card debt. But if you had that money with you all year, maybe you wouldn’t have NEEDED to use your credit card. Or if you REALLY want to be an adult about it, that extra money could have automatically been deposited into a retirement account.  Here’s why it makes sense…

Let’s say you get paid twice a month, and got a refund this year of $1,200.  That means you overpaid by about $50 bucks per paycheck.

If you invested all that money and kept doing it for 30 years, you’d put away $36,000.  But because of compound interest, you’d actually end up with a lot more than that.

If your 401K or IRA made 6% a year, you’d actually end up with about a HUNDRED-THOUSAND dollars after 30 years.  About 60 grand of it would come from the compound interest alone.