January 23, 2011
How to spend the money the new payroll tax cut saves you
If you're currently a W-2 employee, you may have noticed your paycheck looking a tad bigger this month. That's because the Obama administration's extension of the Bush-era tax cuts just went into effect.
[Image by alancleaver_2000]
The Associated Press reports this payroll tax cut will boost the take-home pay of the average U.S. worker by approximately $700 this year. To find out how much of your salary you'll keep in light of this new law, see this calculator on Kiplinger.com.
(Self-employed folks should talk to their tax preparer to see how this tax break affects them. Out-of-work folks on unemployment stand to benefit too; the new law extends unemployment benefits through the end of 2011. Details here.)
If you're not sure what to do with the extra money you'll be making, allow me to offer some suggestions:
Save it. Boost your investments, retirement account contributions, or rainy day fund.
Donate it. Don't like the way the world looks or the government works? Find a worthy cause and put your money where your mouth is.
Pay down debt. Use the extra cash to chip away at a car loan, credit card bill, or mortgage (that is, if you anticipate keeping your home for many years).
Upgrade your health care coverage. If you're self-insured but your plan is sorely lacking, see if a few extra hundred bucks a year can buy you a plan with more coverage or a lower deductible. Alternatively, if you don't have dental insurance, you might want to look into that.
Stimulate the economy. Treat yourself to that new dress, piece of furniture, or night on the town you've been wanting.
Spend it on an unemployed friend or three. Host a dinner party for friends who've been living on Ramen or take a friend who can't afford a night on the town out for one. Better yet, pay their heating bill.
Get balanced. Haven't taken a vacation in two years? Maybe now you can afford one, even if it's just a long weekend at a cabin on the coast.
How about you? If eligible, how do you plan to use the extra income this payroll tax cut affords you this year?
Karen Burns is the author of The Amazing Adventures of Working Girl, a career guide based on her 59 jobs over 40 years in 22 cities.
Kristen Fife is a senior recruiter, career mentor, blogger and resume consultant based in the Seattle area.
Lisa Quast is a certified career coach, mentor, business consultant, former corporate executive and author based in the Seattle area.
Randy Woods writes about job-search tools, networking techniques and other tips to help you land your dream job.
Matt Youngquist is the president of Career Horizons, a career counseling firm.
Natalie Singer is a Seattle writer, editor and small-business owner.
Michelle Goodman is the author of "My So-Called Freelance Life" and "The Anti 9-to-5 Guide."
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