How To Get the Maximum Out Of Your Paycheck
Presented by Paystrubmakr.com
A paycheck and its pay stub that are your money, made of the paper or electronically sent, solid-phase has multiple purposes accept the main one that is paying your salary. Paystub is the proof of your income and the presentation of your withholdings and deductions, taxes, tax exemptions, and benefits. This article was written to help you enjoy as much as possible your money, earned by hard-working. We will review the option to make more from the same pay and make some more income at the same time.
Your Income And Expenditure
First, we will study the total income and expenses. With this information, we can start to look for your financial responsibility. The first step is to analyze carefully before taking more costs on yourself. Check and note the following:
- Your net income after paying the taxes.
- Expenditures are your monthly expenses. How much money you spend on:
- car payments
- transportation cost
- student loan debt payment
- groceries and food
- insurance, other bills
Add the non-monthly expenses like annual or semi-annual costs like:
- property tax,
- income tax,
- car insurance & registration,
- home and auto maintenance,
- expected dental or health care costs,
- Summarize the expected annual cost of all of these items and then divide that number by twelve. The quotient is the monthly cost of those obligations. Take that number and add it to your monthly expenses as “miscellaneous” or some other label of your choosing.
Once you have learned both your income (A) and monthly expenditures (B), you can subtract B (expenditures) from A (profit).
Take note of your spending for two or three months, keep the details on a notebook, do not miss any eating out or a movie you went to, or shopping you have made in this period. After this period you will know about your discretionary income and where you can save by applying a financial restraint. Investopedia Discretionary Income Defined
Discretionary income is the amount of an individual’s income that is left for spending, investing, or saving after paying taxes and paying for personal necessities, such as food, shelter, and clothing. Discretionary income includes money spent on luxury items, vacations, and nonessential goods and services. Because discretionary income is the first to shrink amid a job loss or pay reduction, businesses that sell discretionary goods tend to suffer the most during economic downturns and recessions.
Important tip: Do not use credit cards or other credit; use only cash for discretionary spending.
The credit cards and phone wallets make payment easy and make it possible to buy even when you do not have enough real money to spend. Many people overspend the money they make into loans and paying more interest. An excellent way to keep control of your spend is to separate the budget for a pay period in cash and stick to the plan to spend only this amount. You can feel the money when you spend it, and it is not like plastic money that you do not see or count in your hands. With a credit card in your hand, it easy to buy a new per of sues with no plans to do so. The feeling of the cash you have in hand and the need to keep spending what you must pay to survive will stop you from hasty purchases.
Do not miss the loyalty programs and the different coupons that you can find in the stores that you visit frequently. Chose the free to join programs and enjoy the discounts they offer.
You have to spend less than what you earn and save it in a saving account. Look at your income carefully and take anything that you have above the basic needs of your family.
You must take this money out of your day to day money and religiously deposit it in the savings account. It will become your emergency fund. You will have in this fund at list a six-month necessities coverage. This fund will secure you from a losing job crisis, or let you have the capacity to leave one job and look for a new and better one. If you are using the total paycheck, you are depending on a steady job and cannot support leaving it for the next job. Having the power to say no for a lousy job is essential for your financial situation and your career and mental health.
The sooner you start saving and investing, the easier that goal will be. If you start at age 25, for instance, you only have to save $15 a day to reach seven figures by age 67.
401K Retirement and Accounts: Employers are offering different funds for the employees to save their money for retirement, those funds are the base for your retirement and a tool to avoid paying taxes on this money, Retirement funds are considered as pre-tax money. If you deposit some money from your taxable income into these funds, you will gain in two ways. It will take you down the brackets, and save on the percentage of tax, and the tax you should pay on the same amount is avoided too.
The best way of saving tax payment and increase your pension funds is to contribute every pay period a fixed amount from your paychecks to 401K. The best you can do is to equal your part with the employer’s part. Any amount that you can save for your retirement will help you in 20 or 30 years from keeping it. An old Bulgarian saying says. Break by a break, and a house is built.
Savings Accounts: It is recommended to set up an automatic and recurring transfer from the checking to your savings account on each payday. This money will be used to build the emergency fund you need. Savings like this can help you to save toward big-ticket expenditures like your dreamed vacations. You got a raise, keep it, and the same with a bonus.
The best way to save and secure your financial future. Will be to save as much of the money you don’t currently earn as possible.
Once you establish a reasonable level of life and your best possible saving for retirement and emergency fund, you can take every extra money that you made and save it for the future trip or open a business by yourself.
For example, you got a raise and expected to get an additional $500 each month net after taxes. You are living well and responsible for your present finance. You can enjoy $500 pre-tax if you add the $500 to the 401K. As you do not need this money for your day to day expenses, it will be better to save it on the 401K and boos your saving for retirement.
Keeping money for rainy days will always be a good step toward financial security. As things go better with a raise, they can go wrong if you have to leave your job. Those $500 a month will give you some oxygen for the time you need to look for a new job and will let you look for the best job available.
You can do the same with your annual or semi-annual bonuses, As you have enough money to sustain the right level of living you can save or invest this money for your financial strength. You may have children that will need to go to college, and they will have a much higher start without the loans for university.
Managing the Withholdings
The average federal tax refund was higher than $3000. That means taxpayers typically over withholding in favor of the government than necessary. Data presented by the University of Chicago shows that around 100 million taxpayers got refunded each year because of over-withholding. On average, the taxpayers sent close to 7% more than he should.
You can use this IRS tool for the calculation of your withholdings: https://www.irs.gov/individuals/irs-withholding-calculator
Regular pay: The last amount paid to you during your previous pay-period before the pre-tax deductions.
Other pay: holiday, overtime, and sick-pay.
Taxable wages and withholding for the Federal tax: Your federal tax payment from your paycheck (it is shown on your paystub)
Federal taxable wages and withholding: Your salary after the pre-tax deduction. (health insurance, retirement, flexible spending accounts).
State taxable wages and withholding: are your state tax on your net pay.
FICA/OASDI taxable wages and withholding: Your employer payment for social security.
Miscellaneous withholdings: are deductions that reduce taxable income.
How to avoid over-withholding
- You can file a revised 2019-W4 together with your employer. The W4 Form shows the amount of federal income withheld from your salary.
- Claim the proper number of allowances. The more you claim on your W4, the less tax will be withheld from your salary.
Maximize your paycheck
Many companies offer volunteer time off (VTO) for occasions that are convenient for saving the cost of employees that can not make the right level of income for the company. As it is time that you can make money, you better do anything you can to avoid it. Try to pick some extra hours to compensate for what you lose on VTO.
Take Advantage of Benefits
The employe’s benefits are the part of his/her salary that is not made with money but with somethings that worth money, law cost of health insurance, and part of it paid by the employer. Make sure that you are getting the most of it by doing the following.
Saving a coin and one more ends with a big pile of coins
- Take a look at all the plans that your employer is offering you. See the cost and benefit of each program carefully. Make sure that your plan for healthcare is the one you need, and its cost-effective balance is the best.
It may be better to leave part of the healthcare plan like the vision insurance if you are young, on your 20s with a vision of 20/20. If you use low-cost contact lenses, it will be better to buy it with the money you save from the plan you will not pay anymore.
Your premium can be lower, based on your income
No matter which metal category you choose, you can save a lot of money on your monthly premium based on your income.
When you fill out a Marketplace insurance application, you’ll find out if you qualify for these savings. Learn how you can save on your monthly insurance bill with a premium tax credit.
Check your spouse’s healthcare plan coverage and cost, and see if you can save money by using your spouse’s plan instead of yours.
You can save by using the “employer-match programs” The most known and used is the 401k. Employers can match your part in this plan, sure up to a certain amount.
401(k) Plan Fix-It Guide – Employer matching contributions weren’t made to all appropriate employees.
Employers sometimes fail to contribute the employer matching contribution according to the plan document. In many cases, the problem is caused by failing to properly count hours of service or identify plan entry dates for employees. You also may make incorrect contributions when you or the plan service providers fail to follow the plan document terms. Another common problem is using the incorrect definition of compensation from the plan document for determining matching contributions. For example, you or your administrator may not include deferrals in compensation when calculating the matching contribution, but this may be required under the plan document.
Paid Vacation and Sick Time
Employers allow their employees a certain period of paid vacations and spent sick days per year. Veteran employees have more vacation or sick days ass they have more time working in the same workplace. There may be differences between companies about the way to cap these two types of pay. You need to study your company’s politics on vacation and sick days carefully. If you leave your job, you are entitled to be paid the pending vacation and sick days.
Hire a financial adviser
We highly recommend you hire a financial adviser before you make essential decisions on your saving or investment plans. It is always good to be supported by a professional in labor law and saving and investment.
My grandpa used to tell me that the difference between a rich and a poor person is only one dollar. The rich save one dollar a day, and the poor take a loan of one dollar a day.
Disclaimer: John Wolf and paystubmakr.com are making a total effort to offer accurate, competent, ethical HR management, employer, and workplace advice. We do not use the words of an attorney, and the content on the site is not given as legal advice. The website has readers from all US states, which all have different laws on these topics. The reader should look for legal advice before taking any action. The information presented on this website is offered as a general guide only