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.
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