Thursday, March 10, 2011

Make Tax Credit Extension Work for You

You may have noticed a little more money in your paycheck this year. Federal legislation signed into law in December extended a couple of things affecting net pay: a temporary 2 percent reduction in the FICA tax (for Social Security), and a two-year extension of all tax rates.

A worker with an income of about $50,000 can expect to get a take home pay boost of $1,000 over the course of the year, which comes out to approximately $83 per month.

What should you do with an extra $1,000?

A few prudent things include

· Building up your emergency fund. Could you cover several months of living expenses if something happened to you or you needed money quickly?

· Pay down debt -- especially credit card debt. Make sure any high interest debt is reduced. Then put the rest toward an extra payment on your car loan or house mortgage.

· Save for retirement. Invest in your long term financial security by putting the money in a tax-deferred retirement plan, like an IRA.

· Reward yourself. If you're covered, it's okay to treat yourself. But shop around for good deals.

No comments: