Living Paycheck to Paycheck
According to the 2017 American Payroll Association (APA) national online survey, “Getting Paid in America”, 37.3 percent of America’s workers would experience financial difficulties if their paychecks were delayed for just one week. This response indicates that many workers are living paycheck to paycheck. Making small but well-planned adjustments now can help you reach your financial goals in the future.
Maximize Your Paycheck Income
Through the management of your paychecks and making slight adjustments, you can net more monthly income. Consider these options:
- Taxes – If you don’t have enough taxes withheld from each paycheck, you may owe money when it comes time to file your taxes. Conversely, if you have too much money withheld from each paycheck, and you receive a large refund, you’re essentially giving the government an interest-free loan at your own expense. It is in your best interest to receive guidance from your accountant or tax-preparer regarding paycheck withholdings.
- 401(k) – Make sure you take full advantage of the retirement benefits offered by your employer. It’s your responsibility to pay attention to how your contributions are allocated to ensure your nest egg is diversified appropriately. If your company offers a match, and you are not contributing the maximum amount they match, you are giving up “free money”.
- Medical expenses – Health care flexible spending accounts allow you to set up accounts that help you save tax dollars on your planned out-of-pocket medical/dental care costs. Check with your benefits administrator to determine if these options are available as they are a great way to save tax dollars.
- Dependent care expenses – Similarly, many employers offer dependent care flexible spending accounts to help cover the cost of work related child care. By deducting dependent care costs from your paycheck pre-tax, you could save for your child’s care today and tax dollars tomorrow.
- Direct deposit – Many Americans save less than five percent of their annual income. One way to make it easier to manage your paycheck, and save for a rainy day, is direct deposit. Set up separate distributions to checking and savings accounts. This approach will help you live within your budget and ensure a portion of your earnings are automatically added to your savings.
Understanding and managing your paycheck requires effort but the time put in is well worth it. By knowing how much money you will receive each month, you can set yourself up for financial success.
