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Did You Notice Your Pay Decrease in January?

Budgeting image with calculator and pen

Did you notice a pay decrease in January? If you were not following the fiscal cliff discussions closely you may have missed a critical point, which affected the rest of us. The overall message was the people who made over $400,000 were going to lose some of their tax advantages. The message lost in all of this was the 2% change the rest of us were going to see.

Let me explain a little bit about the change. Originally payroll tax was 6.2%, which is what helps to pay for Social Security. The economy was in a pretty rough downward spiral so the government decided to enact a payroll tax holiday, which brought the payroll tax down to 4.2%.

Great news at the time and it was meant to help stimulate the economy by providing more money for purchases outside the home. The not so great news is these holiday events are never meant to be a permanent solution and thus do eventually end.

January has seen the end to this tax holiday, so if you have been working on your budgets, you will need to take into account this new change to your personal taxes. A family making $50,000/year will need to pay an additional $1,000/annually.

Taxes are the one variable we need to account for in our family budgets. Remember taxes are not just what is taken out of our taxes, but you also need to account for increased property taxes, toll road fees, and registration taxes.

Do not let increases derail your hard work. Remember you can either (1) find other areas to cut spending in order to meet the increased taxes or (2) find ways you can make more money to offset the increases in taxes. Depending on your situation, one way may be better than the other.

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