Use Extra Social Security Income Tax Money Wisely
CCCS of Forsyth Offers Ideas
Winston-Salem, N.C. — Many of us will see bigger paychecks in 2011, thanks to a new federal law which temporarily reduces social-security payroll taxes. Counselors at Consumer Credit Counseling Service of Forsyth suggest that, instead of using this windfall as an excuse to get further in debt, employees apply it to paying down debt, beginning or adding to a savings plan, and generally improving their personal financial situation.
The Tax Relief, Unemployment Reauthorization and Job Creation Act of 2010, which became law on Dec. 17, 2010, reduces by two percent the portion of the employee’s payroll taxes that fund social security, with the rate going from 6.2 percent to 4.2 percent. As an example, an employee with an annual gross pay of $45,000 (less any contributions to flexible spending plans for medical and/or child care costs) will see an extra $75 a month ($34 if paid bi-weekly) in the payroll check.
Particularly for employees who are struggling or mired in debt, the payroll-tax changes offer an excellent opportunity to start on a course of personal financial responsibility, say officials at CCCS of Forsyth.
“This is extra money that you’re not accustomed to having anyway, so why not use it in a financially responsible way?” said Shenell Thompson, CCCS’s Director of the Center for Financial Education. “It can signal the beginning of a lifetime of good saving and money habits.”
CCCS of Forsyth offers the following tips from The National Foundation for Credit Counseling, when deciding what to do with the extra money.
Apply it to basic payments. If you struggle each month to make rent or mortgage, utilities, insurance premiums, buy medicine, or even put food on the table, this is your opportunity to do something about it. Designate these payments as priorities, and use the extra money to get current and stay current on them.
Put the extra money from your paycheck toward debt repayment. Don’t let debt own you –Debt is likely doing you the most harm financially, particularly if you’re carrying debt over from month-to-month and paying double-digit interest on it. If you stop charging and put the extra money from your paycheck toward debt repayment, you’ll see your debt decrease rapidly.
Bring past-due accounts current. If you’re behind on debt payments, putting this money toward catching up will stop the late penalties and negative notations on your credit report. Don’t forget that late payment charges only add to your balance, so stopping these fees will be an extra bonus.
Catch up on a past-due vehicle payment – Your vehicle represents a secured loan, meaning that the lender has the right to repossess it if you fall behind on payments. The loss of transportation will not only be a great inconvenience, but it will be costly to reclaim the vehicle or purchase a new one. Meanwhile, your credit report and score are being seriously tarnished. It is likely that you put money down on the vehicle, and have made monthly payments. Don’t risk losing both the money and the vehicle due to repossession.
Start or add to a savings account – The NFCC’s Financial Literacy Survey revealed that 30 percent of consumers have zero dollars in savings. These people are living on a very slippery slope, with the next unplanned expense often putting them over the edge. Put this extra money into a savings account, and commit to not pulling it out except for true emergencies. You will never regret having this financial safety net.
Invest in yourself – With the job market still unstable, it is a good time to retrain or update your professional skills. Apply the extra money to adding a certification or degree to your resumé. It could result in you moving up at your existing job, or landing a new one.
Prepare for tomorrow – If you have debt under control and a robust savings account, use this money to invest, particularly by increasing contributions to your retirement accounts, either through the workplace or your own IRAs. No one has ever regretted having too much money saved for retirement.
“Resist the temptation to pocket the extra money or to buy the next best widget,” said CCCS’s Thompson. “Instead, think about how it can work to insure your financial future. This is a rare opportunity to improve your status with a minimum of pain. As the saying goes, don’t put off until tomorrow what you can do today.”
If you need assistance deciding how to make the best use this money, make an appointment with a trained and certified credit counselor at CCCS of Forsyth. Call 336-896-1191.
About the National Foundation for Credit Counseling
The National Foundation for Credit Counseling (NFCC), founded in 1951, is the nation’s largest and longest serving national nonprofit credit counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior and build capacity for its Members to deliver the highest quality financial education and counseling services. NFCC Members annually help four million consumers through close to 800 community-based offices nationwide.
About CCCS of Forsyth
Consumer Credit Counseling Service of Forsyth County Inc.(CCCS) was established in Winston-Salem in 1972 as a non-profit educational organization to help families build wealth, achieve financial self-sufficiency, attain financial stability, and handle financial crises. CCCS offers its services to the community through the Financial Management & Debt Counseling Program, the Center for Home Ownership, the Homebuyer Education Center, the Center for Financial Education, and Senior Financial Care Program. Low or no-cost services include financial assessment counseling; budget review; financial literacy education; Senior Financial Care®; a debt management program to pay off unsecured (credit card) debt; credit report review; homeownership education and counseling; and mortgage default/foreclosure prevention counseling. CCCS partners with families, schools, religious organizations, businesses, government agencies, and other non-profits, serving residents of Forsyth and surrounding counties from offices in Winston-Salem, Kernersville and Mocksville. CCCS was reaccredited in 2007 by the Council on Accreditation (COA).