Do you want my gross or my net?
Do you want my gross or my net?
I have had the opportunity to sit down with many individuals and couples regarding their finances. Invariably, we will get the question, “Do you want me to put down my gross salary or my net take-home pay on the spending plan?” Our response is, “If you want to us to help you with all of your finances, we need to start with your gross salary.”
You see, we tend to forget that many of our financial decisions have already been made when that check is deposited into our account. We also tend to forget that we can make a difference in our overall financial lives if we would review these taxes and deductions on a regular basis. So much is taken from our checks that we might be paying for areas that are just not needed or can be obtained elsewhere for less money. Here are some examples of items you will want to review the next time you review your pay stub.
*** Taxes- One of the most famous quotes of our time is, “There is nothing certain in life but death and taxes.” The problem with taxes is that we think of it as a once a year exercise. The fact of the matter is we have control over the amount of taxes deducted on a monthly basis. We have become so used to paying this out of our paychecks that we think nothing of the $100s of dollars that flow into the government’s hands from our paychecks each month. Americans received an average tax refund of $2,427 in 2007 and many are struggling to make ends meet each month. In our years of counseling, we have seen many examples of tax refunds that are seen as a windfall when they could best be used for systematic savings or to pay down debt on a monthly basis. One of the first questions we ask counselees is how much of a tax refund they receive. If they are struggling to make ends meet and are getting back $750 or more in a refund, our recommendation is to go to their Human resource office and increase the number of exemptions on their W-4. www.Quicken.com also has some calculators to help you in determining how many exemptions to set given your situation. Get those dollars back in your paycheck now and stop giving the government an interest free loan on YOUR money.
*** Tax-advantaged accounts and savings plan- Another important consideration is how those deductions that are designed to help you (flexible spending accounts, dependent care accounts, 401-Ks) also have excellent tax advantages. Each time you put money into one of the accounts listed above, you reduce the amount of your income that is taxed. Here is an example: John makes $60,000/ year and contributes 10% of his income to a 401-K ($6,000); $1,500 of his income to a flexible spending account; and $1,000 of his income to a dependent care account. That is a $8,500 reduction and a taxable income that is now $51,500 instead of $60,000. For John who is in a 28% tax bracket, that amounts to $2,380 in tax savings. Talk to your human resource department about these deductions and the overall benefits for your family.
*** Life/disability insurance- Typically, companies have very good plans for group life and disability coverage for employees. The concern comes in when we try to assess total life and disability coverage for a family. Typically, most people really don’t understand their disability and life coverage and what they will cover and for whom. Take a minute now to pull out your paycheck, company handbook and all other life and disability policies you have. Make sure you have adequate coverage (and that you understand what those little initials on your check stand for) and that you are not either over-insured or have gaps in important coverage.
By taking time to review your paycheck, you will better understand your financial situation and how you can have an immediate impact on your financial future.
For more information on how to analyze your expenses and Christian financial principles, you can purchase our workbook, Storing Treasures on our newly renovated web site: www.storingtreasures.com or you can call Mike Haswell at 770 995 7953
Sphere: Related ContentRelated posts:
