If you’re really that afraid you’re going to spend whatever leftover money you earn throughout the year on something stupid, set up either a 401(k) with automatic deductions or an account that buys you some conservative investment (Treasury inflation-protected securities, muni bonds, whatever.) Automate it, don’t think about it, reap the benefits every April 15. Understand the fundamental truth about the U.S. tax system, which is that it’s wired to take advantage of the very wage-earners who can’t exercise enough discipline to save money throughout the year.

If you are overpaying taxes as a way to manage your money, you already know that this is not the “most effective way” to manage your money.

Take it as a challenge to yourself to learn the self-discipline necessary to get and maintain control of your spending habits.

If you can learn to manage this extra $500 then you can probably find ways to more effectively manage another $500 of your expenses each month.

In a few years you will not only have your emergency fund covered and debt paid you will also be well on your way to financial independence!

Thanks

Mathematically and financially, the path of deliberately delaying your tax refund money via excess withholdings is not the best option available. However, the claim is that the best option is not workable because you’ll rush out and spend the money once you have it.

I hear this exact same scenario and argument over and over again. Purchasing something with a credit card and paying it off before interest charges occur is financially better than paying with cash or debit card, but many people advise NOT using a credit card because they will go crazy with it. Similarly, paying down the highest interest debt first is surely the best way mathematically to get out of debt, yet many advise paying off other debt first because they are afraid people will get discouraged. Lots of sub-par investments like (non-renting) vacation homes are also justified by the fact that at least the mortgage is a “forced savings plan” and better than just blowing the money that’s in your pocket.

I’m pragmatic enough to see that if people really cannot control themselves with the best option available in these scenarios, then it’s really NOT the best option for them. However, people can also change and learn and grow. A lot of people sell themselves short their whole life by insisting over and over at every scenario that they “can’t handle” the most financially sound choice. That often adds up to a huge pile of money over one’s lifetime.

I do agree with the reader that if he lacks the discipline to save money each money, he should continue to do what he is doing.