DETROIT – As the reality of a payroll tax increase sets in, many may be looking for ways to make-up for the cash lost from each paycheck.
About 160 million American workers are seeing their take home pay shrink as the Social Security tax returns to 6.2 percent, after a two years of a lower
rate (4.2 percent).
The average worker will lose about $700 a year, money that could be spent on food, clothes, and other expenses.
Making up the money:
1.Adjust your tax withholding: Many of you might get a big income tax refund each year. If you tweak your withholding, you can get more cash in your paycheck, and hopefully come out even at the end of the year. Almost all financial planners will tell you to withhold less, so the government isn't holding onto your money all year long. Figure out the number of withholding allowances you should claim by using the worksheet on the IRS
website at www.irs.gov.
2. Max out your 401(k). If you have a retirement plan at work, make sure your contributing the maximum amount allowed.
That can help reduce your taxable wages, which lowers the tax you pay, and it will give a boost to your 401 (k).
3. Look for savings on insurance, auto, life, property. Review all your insurance expenses to see if there's savings you may have missed.
4. Refinance your mortgage- Interest rates on home loans remain at historic lows. See if you can reduce your monthly payment, and you might not miss that extra cash as much.
5. Check all the fees you're paying. Are there any accounts you don't use anymore? Switch to credit cards with lower rates.
6. Finally, it's probably the least attractive option, but it might help to get a second job, but maybe it can be something you like more than your current full-time job. You could use the experience to explore new career options that might improve your life even more down the line.