Post image for 5 Things You Should Consider For Your 2011 Payroll Tax Savings

5 Things You Should Consider For Your 2011 Payroll Tax Savings

by Jason on February 1, 2011

As we are probably all aware, the federal government passed the tax cut extension at the end of last year.

Part of that extension was the payroll tax break that provides a 2% payroll tax cut for employees, which would result in tax relief of an estimated $120 billion for workers.

This means we get more in our pockets with each paycheck, which lawmakers hope we’ll go out and blow on consumer goods to help spur economic growth.

But, we all know better don’t we?  I hope we do anyway.  Recently, Wise Bread ran a post about the 2011 payroll tax break and how to use the savings to get ahead.

I thought I’d offer a little perspective on how to use the savings on payroll taxes too:

Save Your Payroll Tax Savings

This is an obvious one, but a 2% reduction in the payroll taxes could wind up being a nice chunk of change at the end of the year.

Here’s the thing, you’re already used to not having that money.  Why not sock it away?  Here’s a couple ideas to get you started:

  1. Increase (or start) your 401k contributions – a 2% increase to your 401k contribution will make for a nice addition to your retirement plan.  Or, if you haven’t started saving into your 401k yet, it’s the perfect time.
  2. Make IRA contributions – now is a great time to use that money to open a Roth IRA, or make a Traditional IRA contribution.
  3. Build up your cash reserves – use that 2% to build up that cushion for emergency funds or general cash reserves.

Give Your Payroll Tax Savings

According to GenerousGiving.org, “Christians worldwide had personal income totaling more than $16 trillion in 2007 but gave only 2 percent, or $370 billion, to Christian causes.”

Two percent!  Many of us could take our 2% payroll tax cut and double our giving!!  Or, some of us could simply start giving with that money period.

Here are some ideas and motivation for generous giving.

Reinvest Your Payroll Tax Savings

Think like a business owner.  If a business owner turns a profit, or experiences some savings, he or she naturally thinks about how they could invest right back into the business for growth.

How could you reinvest your payroll tax savings in yourself for growth?  Here are some ideas:

  • Better your education – take online courses, or buy some books and become a self-taught master at something that could improve your skills and help you earn a little more money.
  • Invest into a home-based business – many home-based businesses are scams, but some are very legitimate ways to earn a little extra money.  Here are some legitimate home-based business ideas.
  • Invest into a blog or website – starting a blog is a fun way to make extra money, but it takes time and a little bit of cash.  Use the payroll tax savings to help get your site off to a great start.

Spend Your Payroll Tax Savings

This seems counter-intuitive to what the first three ideas are, doesn’t it?  Let me explain:

Don’t just spend the money on yourself, but rather use the money as an opportunity for True Wealth, specifically by building relationships.

In other words, use the savings for dates with your wife, or taking the family out to eat to their favorite restaurants.  Think about ways you can build the relationships with those you love.

Or, use the payroll tax to host dinner parties at your place and invite your neighbors over for dinner to get to know them.

Spend the money to build relational equity.  Investing into people is one of the greatest expenditures you could make.

Reduce Debt With the Payroll Tax Savings

Lastly, if you are in “debt-paying-mode”, then simply take the payroll tax savings and reduce your liabilities.  Put the money down on credit card debt, your auto loans, school loans, or your mortgage and get ahead.

Think about how much further ahead you’ll be when you use that 2% to knock down debt.  You’ll be glad you did.

What Are You Planning to Do with Your Payroll Tax Savings?

Let’s hear from you, what are your plans with this money?

Google+ Comments

Related Posts