photo © 2006 Ray TsangMany of us had our first paycheck of 2011 this past Friday. If you did, you might have noticed that your social security deduction is lower than it was in 2010. The reduction, known as the payroll tax, was included in the negotiated tax bill between President Obama and Washington’s Democrats and Republicans.
Government officials hope that the deduction will be spent and help with economic growth. While I love economic growth, I love Narrow Bridge readers even more. Don’t be stupid. Don’t go waste money that you can put to better use. Here are some ideas for using your 2011 tax break.
Cover Your Bills
If you are already in a bad situation, make sure to pay your bills. Pay them on time. If you are having trouble making ends meet, though, it is probably a good idea to start a top down financial overhaul and fix your spending problems. Remember, it is no one else’s fault that you are in debt or can’t make payments. Take responsibility and fix it.
Emergency Fund Savings
We have seen a lot of people come up short over the last couple of years. If you want to avoid the situation above, save up for a bad day. You never know when your income may be disrupted or you will have an unexpected expense. That is why it is called an emergency fund, after all, you can't plan for when you need it.
Automated Retirement Savings
Your payroll tax is lower by 2%. Why not take that 2% and put it straight into a Roth or 401(k). You are already used to living without that money, so stay used to it. Put it away for your future in a tax advantage account. Automation is key to ensure you don't spend what you should be saving.
If you think about it, the social security tax is going to “fund your retirement” anyway, so use that part of your budget as it was intended.
Take a Class
People will save up to $2,000 in 2011 from this tax cut. Why not take a class that will pay off in the long run by helping your career or income prospects. Learn a skill that can pay you, like bookkeeping or photography.
Buy a Stock
A lot of investors don’t know where to start, so they are not an investor yet. Put the money into a brokerage account and learn how to invest. Buy a stock, ETF, or other investment. It could pay off in the future. Use it as inspiration to learn more about investing.
What are you going to do with the money?
I have a lot of sweet ideas, but crowd-sourced ideas are often better than individual ideas. What are you going to do with the money? Are you going to blow it on something fun or put it towards a long term goal? Please share in the comments.