By now, most everybody will have experienced the first pay stub of the new year, and the Washington reality has set in here locally. Your paycheck was 2 percent less than you expected, thanks to the increased withholding enacted late last month.
Families smart enough to think ahead are already planning for an additional mac-and-cheese dinner each week, instead of a night out, but for those who live paycheck to paycheck, the road is even rougher. Even if you received a January raise, there’s less than you expected at a time when the pundits say there may be an economic recovery in the air.
We prefer the “glass half full” point of view. The paycheck is what it is. Instead of bemoaning the extra tax, use the new reality as a nudge to get a better grip on your pocketbook.
I’m not just referring to the weekly gas-and-grocery budget. Knowledge of the family’s 2013 income stream opens the opportunity to step back and look at the big picture. The folks in Washington did that. It makes sense that families should do the same thing at the same time.
By “big picture,” I mean your home, major purchases like a car, your kids’ education and, most importantly, saving smartly to fund a secure retirement. We’re advising CommunityAmerica Credit Union members not to look on the new taxes and reduced income as a cross to bear, but as a chance to take greater control of their money.
And you shouldn’t have to go it alone. Financial institutions staff advisors whose sole responsibility is to help people navigate big changes like higher payroll taxes. These advisors sit down with people and discuss what it will take to achieve life goals. Working with formulas and knowledge of your needs, advisors can calculate what it takes to buy a home, fund college for your kids and collaborate on a plan to make sure you can retire when and how you want.
Admittedly, this process is an education, a mini-class in personal money management. But it’s more than worth the trouble. You may not know the difference between a Roth IRA and a traditional IRA, or which is the best for you. The good news is that trained financial advisors will help you learn the difference and also help you decide which is best for a given situation. Some even do this free of charge. And the investment in time and energy now can have huge, positive impact down the road.
It’s an education that’s easily attainable at good financial institutions, especially at credit unions and some local banks. And it’s an education that pays dividends in the long run, and not just the dividends that credit unions pay to their member-owners in good years.
Learning new things about your finances, especially at a time when newly enacted taxes are taking effect, is good stewardship. Likewise, financial institutions must be good stewards of money for their depositors and borrowers because ultimately, as we have seen, this does greatly impact our local economy—something we all have a stake in.
So write a letter to your congressman if you want, but complaining about new tax rates won’t get any of that money back. On the other hand, using the change as a signal to do something about your finances can maximize the impact of the money that’s available to you on a daily basis and for the long run. Don’t miss the opportunity to take action now and get on a path that leads to financial freedom. And know that you’re not alone.