So the master minds in Washington worked together and got a deal done regarding the extension of the payroll tax, unemployment benefits and avoiding a fee cut for medicare doctors for the rest of the year. This is a nice extension which means your wages will be taxed at 4.2% rather than being raised to 6.2% which was the original payroll tax rate before the tax cut was put in place. You shouldn't changes in this area regarding your monthly salary. However, something to keep in mind is that this extension is going to cost ~$100 Billion and the government won't be enacting spending cuts in other areas, which the Republicans were pushing for, to fund this extension.
With that in mind, there is a chance that we could see higher fees somewhere else to compensate for this extension. Where might those fees come from, I don't know, but I think there are some things we can do as American citizens to help out. Here are some of my thoughts:
1. Pay down debt - Use this payroll tax cut to help pay down debt. If we as American citizens can figure out how we can pay down the debt that we owe, we can all help his economy get back on its feet. Let's think about this. If we pay off our debts whether it be credit card, mortgage, student loans, home equity, auto, or whatever, we will help pump money into the economy which allows the banks to lend more money. If more money is being lended, then that means more projects/work is available and so on. It is a cycle. This payroll tax cut is very nice but let's be wise with how we spend this extra money.
2. Use it wisely - This goes a long with my comment on debt but think about how you can use this money to help you afford the things you need rather than what you want. As you are budgeting, you must take care of your needs first and then the wants follow. If you are new to bugeting and have certain spending habits that cater more towards your wants, think about your situation and the needs that you have. I can promise that if you can meet your needs, you will begin on the path to meet your wants as well. It is a tough road but it can happen. Be wise and meet your needs first, that will help you as an individual and the country. Some ways to use this money wisely might be to save it for a rainy day, save for a major car repair that is coming up, use for your kids clothes or for something that you need that will help you grow and develop as an individual.
3. Use it with the end in mind - This is a concept that will help you achieve your goals. For example, you want to pay off your debt in 5 years. With the end in mind, you will know how much of this payroll tax money you need to save to pay off your debt in 5 years. If you have the end in mind, you will put yourself in a powerful position. This powerful position is you becoming a master of your funds rather than your funds mastering you.
These are just a couple of suggestions. I hope this payroll tax extension will help everyone with a little extra to help with their budget and put you in a stronger financial position as you use it wisely. Budget wisely to generate cash flow to generate a masterful position of your finances.
Sunday, February 19, 2012
Tuesday, February 7, 2012
Payroll Tax Increases...Appears Likely
Just a note to all, the payroll tax rate is scheduled to increase from 4.2% to 6.2% at the end of this month. This will affect ~160 million people unless the master minds in Washington can get their act together and figure something out. There is an article on CNN.com, here is the link http://www.cnn.com/2012/02/07/politics/payroll-tax-cut/index.html?npt=NP1 that provides an update on where these master minds are in the process of extending the payroll tax cut until the end of the year. It sounds like they are back at square one, that sounds familiar, and the democrats could be using it for leverage for this upcoming election to prove that when a bipartisan discussion occurs that an agreement doesn't actually happen. Whether this is true or not, I don't know, but if it is, then that is pretty low and ridiculous. There are ~160 million people out there, me being one of them, that could use the couple extra dollars a month that this payroll tax cut provides.
The truth is, most of us don't get special perks, which save them money, that these people in Washington get. What a government, let's make ~160 million people struggle a little bit more for just a little bit longer so an election can be won. Or let's just not act like professional and good standing citizens and make life just a little more difficult on Americans during a tough economic period. It isn't a big deal. Whether there is an election this year or not, the people in Washington said that they would fight for a strong recovery. I guess taking money from the hard working American is always the best route to take because they can't make a decision to cut funds in another way. Sometimes I wish they would just grow up and set priorities rather than submit to childish acts. If this payroll tax increases, it is hard to see how that would help in any election except if you are the republican nominee, in this case, and now they have leverage.
At any rate, manage your budgets accordingly and prepare yourself for an increase in the payroll tax and expect a pay cut as well. Hopefully this is just blah and something positive happens but if not, atleast you are prepared to manage this negative change. Cheers to budgeting!
The truth is, most of us don't get special perks, which save them money, that these people in Washington get. What a government, let's make ~160 million people struggle a little bit more for just a little bit longer so an election can be won. Or let's just not act like professional and good standing citizens and make life just a little more difficult on Americans during a tough economic period. It isn't a big deal. Whether there is an election this year or not, the people in Washington said that they would fight for a strong recovery. I guess taking money from the hard working American is always the best route to take because they can't make a decision to cut funds in another way. Sometimes I wish they would just grow up and set priorities rather than submit to childish acts. If this payroll tax increases, it is hard to see how that would help in any election except if you are the republican nominee, in this case, and now they have leverage.
At any rate, manage your budgets accordingly and prepare yourself for an increase in the payroll tax and expect a pay cut as well. Hopefully this is just blah and something positive happens but if not, atleast you are prepared to manage this negative change. Cheers to budgeting!
Sunday, February 5, 2012
Two Types of Costs within Budgeting
When dealing with budgets, there are two main types of expenses that one incurs. Those expense types are fixed and variable. What is the difference between the two, you might ask?
A fixed expense is an expense that is constant and does not change. Each month you will pay the same amount. For example, your mortgage/rent payment is a fixed expense. Let's say your mortgage is $900/month. You will pay $900 a month no matter how much income you make or how well you control your other expenses. You will always pay this $900/month until your mortgage is paid off or your until rent leases terminates. Here is a list of some other fixed expenses you might see in your budget:
1. Homeowners Association Fee
2. Home/Rental/Car Insurance
3. Student Loans
4. Car Payment
5. Life Insurance
6. Cable/Phone/Internet Bill
A variable expense is an expense that is not constant or one that varies/changes on a monthly basis. These are the expenses that you can manage/control on a monthly basis. If you are seeing you are paying too much on electricity, try to turn off the lights more often or if your out-to-eat expenses are too high, discipline yourself and making going out-to-eat a big deal and a special outing. An example of a variable expense would be your water bill. The amount you pay each month for your water depends on how much water you use throughout the month. If you use 50 gallons of water one month and 70 gallons of water another month, the amount you pay to the water company will be dependent upon the gallons used. Here is a list of some other variable expenses you might see in you budget:
1. Groceries
2. Electrical Bill
3. Utility Gas Bill
4. Amount you buy for clothes
5. Entertainment
6. Out-to-Eat
A fixed expense is an expense that is constant and does not change. Each month you will pay the same amount. For example, your mortgage/rent payment is a fixed expense. Let's say your mortgage is $900/month. You will pay $900 a month no matter how much income you make or how well you control your other expenses. You will always pay this $900/month until your mortgage is paid off or your until rent leases terminates. Here is a list of some other fixed expenses you might see in your budget:
1. Homeowners Association Fee
2. Home/Rental/Car Insurance
3. Student Loans
4. Car Payment
5. Life Insurance
6. Cable/Phone/Internet Bill
A variable expense is an expense that is not constant or one that varies/changes on a monthly basis. These are the expenses that you can manage/control on a monthly basis. If you are seeing you are paying too much on electricity, try to turn off the lights more often or if your out-to-eat expenses are too high, discipline yourself and making going out-to-eat a big deal and a special outing. An example of a variable expense would be your water bill. The amount you pay each month for your water depends on how much water you use throughout the month. If you use 50 gallons of water one month and 70 gallons of water another month, the amount you pay to the water company will be dependent upon the gallons used. Here is a list of some other variable expenses you might see in you budget:
1. Groceries
2. Electrical Bill
3. Utility Gas Bill
4. Amount you buy for clothes
5. Entertainment
6. Out-to-Eat
Thursday, February 2, 2012
New Home Loan Refinancing Plan...In The Works?
President Obama has come out with his new home loan refinancing plan regarding homeowners and the ability to refinance their homes without a certain % of equity. Now before you get all excited about this new plan, remember it still has to pass the senate and the house and it needs to be funded, so there are a couple of ifs to say the least. Here are a couple of highlights:
1. Cost will be between $5 and $10 billion; funded is projected to come in the form of a fee to the large banks.
2. Program will help borrowers with private, non-government bank loans
3. Must be current on your mortgage payments in the last 6 months and no more than 1 late payment during the preceding 6 months
4. Have a credit score of 580 or higher
5. Mortgage balance also cannot exceed the loan limits for FHA-insured loans
6. Must own and occupy the home covered by the loan
If you qualify, this could really help out your budget. Remember, we are targeting our mortgage payment to be less than 28% of our gross income. This will help that out. Imagine how much you could save if you dropped your interest rate from 6% to ~4%. I am sure there is good savings there that you could use to help pay off your debts, save for retirement, kids college, a nice vacation, or maybe a little something for yourself.
This sounds like a great program...if it passes. You need to remember that to fund it, it is proposed to charge the large banks. If the banks have to pay an additional fee, then it is likely that those banks will pass that fee onto you and I as the consumer. If this were to pass, watch out for those fees because if you are not careful, they can add up. This is certain but I just want to give you the heads up. A link to the article is below. I found the article on CNN.com/money. Please read the article as it will help educate you more regarding this proposal.
http://money.cnn.com/2012/02/01/real_estate/Obama_refinancing_plan/index.htm?iid=H_PF_News
1. Cost will be between $5 and $10 billion; funded is projected to come in the form of a fee to the large banks.
2. Program will help borrowers with private, non-government bank loans
3. Must be current on your mortgage payments in the last 6 months and no more than 1 late payment during the preceding 6 months
4. Have a credit score of 580 or higher
5. Mortgage balance also cannot exceed the loan limits for FHA-insured loans
6. Must own and occupy the home covered by the loan
If you qualify, this could really help out your budget. Remember, we are targeting our mortgage payment to be less than 28% of our gross income. This will help that out. Imagine how much you could save if you dropped your interest rate from 6% to ~4%. I am sure there is good savings there that you could use to help pay off your debts, save for retirement, kids college, a nice vacation, or maybe a little something for yourself.
This sounds like a great program...if it passes. You need to remember that to fund it, it is proposed to charge the large banks. If the banks have to pay an additional fee, then it is likely that those banks will pass that fee onto you and I as the consumer. If this were to pass, watch out for those fees because if you are not careful, they can add up. This is certain but I just want to give you the heads up. A link to the article is below. I found the article on CNN.com/money. Please read the article as it will help educate you more regarding this proposal.
http://money.cnn.com/2012/02/01/real_estate/Obama_refinancing_plan/index.htm?iid=H_PF_News
Tuesday, January 24, 2012
Social Security Tax Increasing...Will that affect my budget?
A crucial part of budgeting is also watching the taxes that are taken out of your pay check. One such tax is the social security tax. Based on federal law, it is mandated that each employee pay a social security tax even though some of us may not see those funds. Anyway, the rate at which each employee is taxed is 4.2%. The rate of 4.2% is a lesser amount than what we have paid in prior years. I can't remember the year in which President Bush enacted his tax cuts but this is a reduced amount and is part of his work, which is nice. As of March 1, 2012, I believe, we are supposed to see this rate increase back up to its original rate of 6.2%.
As you budget keep this in mind because this rate will go up 2 percentage points and is taxed against your gross pay. So let's illustrate this increase.
This is real money that you will no longer be able to spend on yourself. Please incorporate this into your budget so you are relying on funds that aren't there. I don't know about you but I could certainly use and extra $83.33/month.
These funds are certainly needed by all so let's just cross our fingers and hope that the master minds in Washington will understand that we can no longer sacrifice our hard earned dollars for crazy spending bills. Remember, there is still hope that they could extend this tax break through the end of the year. If that is the case, then we can put this added worry on hold until 2013...more to come on this topic.
During the State of the Union address President Obama mentioned the fact that the government needs to pass the payroll tax/social security tax cut now and it extend for the rest of the year. Let's cross our fingers and hope that happens.
As you budget keep this in mind because this rate will go up 2 percentage points and is taxed against your gross pay. So let's illustrate this increase.
| Yearly Gross Pay Amount | $50,000 |
| Current Social Security Rate | 4.2% |
| Current Amount You Pay In Social Security Tax Per Year | $2,100 |
| Social Security Rate Beginning March 1, 2012 | 6.2% |
| Amount You Will Now Pay A Year in Social Security Tax | $3,100 |
| Amount of Income You Will Lose Per Year With This Increase | $1,000 |
| Monthly Amount You Will Lose | $83.33 |
This is real money that you will no longer be able to spend on yourself. Please incorporate this into your budget so you are relying on funds that aren't there. I don't know about you but I could certainly use and extra $83.33/month.
These funds are certainly needed by all so let's just cross our fingers and hope that the master minds in Washington will understand that we can no longer sacrifice our hard earned dollars for crazy spending bills. Remember, there is still hope that they could extend this tax break through the end of the year. If that is the case, then we can put this added worry on hold until 2013...more to come on this topic.
During the State of the Union address President Obama mentioned the fact that the government needs to pass the payroll tax/social security tax cut now and it extend for the rest of the year. Let's cross our fingers and hope that happens.
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