Are you living paycheck to paycheck? If so, you are not alone. According to a recent survey conducted by the American Payroll Association, two-thirds of American employees are doing the same. But it doesn’t have to be that way! Here are five steps you can take to put more of your money into your pocket—or your bank account!
- Take a look at your W-4. Have you even thought about it since you started working? Did you know you can change it? If your yearly tax return is more than $1,000, you are overpaying your taxes. It may seem great to get that “extra” check every year, but it’s been your money all along. If you don’t adjust your W-4, you’re just giving the government a tax-free loan, then getting that money back in spring with no interest. Instead, adjust your W-4 and either treat that extra money in your paycheck like an instant raise, or put it into your bank account or retirement fund to earn interest.
- Participate in flexible spending accounts (FSAs). If your employer offers them, FSAs can help you save 35-40% on commonplace expenses. Of the two popular types of FSAs, dependent care accounts can help you save money on expenses like daycare for your children. Medical care FSAs help you save on office co-pays for visits to doctors or the dentist, new eyeglasses, and prescription medicines. Yes, you will have money deducted from your paycheck each payday, but those deductions will be made before taxes are calculated—so you’re paying for those necessary expenses with tax-free money you’ve earned.
- Look into a commuter benefits plan. Whether you drive to work and pay for parking or you take public transportation, these programs can save you money every month. If you enroll, you can purchase transit passes on a pre-tax basis or be reimbursed up to $250 per month for parking expenses.
- Move your money around. Don’t put it all in one place—use direct deposit to help you save. First, many banks offer benefits to those customers that use direct deposit, either cash rewards or waived fees. Second, you can deposit your checks into more than one account. If you put only what you need for everyday expenses into your checking account, you can apportion the rest into other accounts, like a vacation fund or a savings account where your money can earn interest .
- Participate in your company’s 401(k) plan. No, you won’t be seeing more money now, but by saving for retirement, you’ll have a more comfortable and stable lifestyle later in life. And if your company matches a percentage of your 401(k) contributions and you’re not contributing, you’re giving up “free money.”
What’s the best financial advice you’ve ever received? Or the worst financial mistake you’ve ever made? Please share your stories in the comment section, below!