After Congress extended the payroll tax cut last week, millions of Americans will continue to see the benefits for another few years. Although already receiving a bigger paycheck as the result of a cut to payroll taxes, a recent study shows that over 65% of Americans had no idea their check was larger than before. With few people even noticing the difference in their income each month, imagine what could be done if everyone took notice and took action to put their money to work.
Despite a 2 percent payroll tax cut boosting paychecks for employees each month, this money has largely gone unrecognized. Many people have failed to make changes to their withholding tax, let alone take important steps like funneling the extra money into a savings or retirement account each month. For someone earning the maximum taxable amount under the bill, the 2 percent reduction brings an additional $2,200 per year in never before seen revenue. The average worker earning $50,000 will see an additional $1,000 in their check over the span of the year. So what should we be doing with this extra money?
Although the tax cut is nice one thing is for sure, it will end and most likely at its next expiration term. This means that Americans have one, possibly more, year to take advantage of this bill. Since most haven’t noticed the change in their checks, why not take that money and put it somewhere to benefit down the road? Set up a checking to savings draft in the amount of benefit each paycheck to funnel into a savings account. Employees could also ask that this amount be drafted into their retirement fund for the remainder of the year, getting them that much closer at meeting their retirement fund goal. The point is that this money shouldn’t just be sitting around waiting to get wasted on expensive coffee or restaurants, instead use it to pay off debt or take a few steps to save it for a rainy day.