In March 2001, the IRS reported that the average refund claimed so far that year was $1,872. This isn’t surprising, as the average refund amount routinely tops $1,500. Many people are delighted by this situation and view their tax overpayments as a mandatory savings account. They depend on their annual tax return to help finance their vacation, to pay off small debts, or to splurge on some item they've wanted but couldn't afford. In fact, they usually have their money spent before their tax return is even in the mail.

They don't realize they are being poor stewards of the money that God has loaned them. They are making an interest-free loan to the government, which is notorious for wasting taxpayers money and investing in programs that are inefficient and sometimes ungodly. Worse yet, they are squandering resources that could be earning them compound interest.

The point is, you can easily adjust the amount of money your employer deducts from your paycheck for taxes by changing the number of dependents on your W-4 form. The form has instructions on how to estimate your taxes. It also will help you determine the appropriate number of deductions necessary to minimize your tax liability. The ultimate goal is to end the year owing no taxes and receiving no tax refund.

This strategy will increase your paycheck! For example, the average taxpayer receiving a return of $1,872 would increase his or her paycheck by about $156 per month.

The table on the right shows what would happen if you took your $1,872 per year refund and put it into a tax-deferred savings account or mutual fund. The first column shows the rate of annual return that is assumed, the second column shows how much a one-time $1,872 investment would grow, and the third column shows what would happen if a person invested that $156 every month for 30 years, allowing the interest to compound. Overall, it all adds up to a tidy nest egg that could be used for retirement, college tuition, grandchildren, or a ministry that God leads you to support.

"It all sounds good," you say, "but we depend on that money for _______." (You fill in the blank.) The reality is, if you are depending on this money to support a regular need, something is out of whack. You should provide for regular needs through your budget. If you don't have a written budget, that needs to be the first step you take.

If, on the other hand, you're using this as a mandatory savings account because you don't trust yourself to put the money in an account, here's a better solution: Set up an automatic withdrawal and transfer system with your bank or employer. Transfer that money automatically into a mutual fund or money market account. That way, you won't notice the change or be tempted.

So, what are you waiting for? Contact your payroll office and get a W-4 form. Fill it out and turn it in. Use this opportunity to start a new way of maximizing your savings.

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