3 Ways to Maximize Your Paycheck
Who likes paying taxes? None of us do really, but we all have to pay them, or we have a big problem with the IRS.?
In the Financial Design Strategy it starts with a review of your paycheck. What is coming into your bank account from your paycheck, but prior to that, what was taken out of your paycheck?? You will see your gross wages, less federal taxes, state taxes, and FICA.??
Next you have “pre-tax” deductions.? Remember those deductions are “postponing” the tax if it is going into your 401k.??
If the pre-tax deduction is for things like medical, dental, vision, health savings account, or dependent daycare, then you are getting a “reduction” of the cost you spend.? For example - if your medical premium is $300/mo and your Federal and state tax bracket total 30% - then you are getting a reduction in cost of $90 ($300 x .30) per month.
Some of the deductions are after tax such as a Roth IRA or a donation.? For the Roth IRA, the growth on the account is tax deferred until you use it and tax free at the time you remove it under current IRS regulations.? Some donations may or may not be a tax deduction for you depending on how you itemize deductions on your tax return, again, under “current” IRS guidelines which are subject to change in the future.?
So what is left in your paycheck to spend???
What do you have to spend it on?
Is there room for additional savings????
Are you paying too much to the federal government or the state government??
Do you get a tax refund on April 15th or do you have to pay on April 15th??
The above issues are very important and should be reviewed annually. A lot of people think that their tax accountant is doing that for them, but they are just taking care of your taxes and may suggest a way to “postpone” paying tax for that particular year.
Therein lies why the questions above are important - where will you be in 3, 5, 10 or even 30 years from now when it comes to the accounts that you postpone paying taxes today to only have to pay on them in the future.
Let’s take a look at the bigger picture and long term exposure!
Especially when it comes to your pre-tax contributions to your 401k? Are you contributing and getting a match from your employer? Are you contributing more than your employer’s match?? Those are things that we'd want to take and look at.
In regards to your net pay, what is left, at the end of the day, and where does it go as mentioned above.? Let’s take a 360 degree look at how you are paying down debts, mortgages, car payments, credit cards, college loans, and even saving for the future.???
Are you giving away principal and interest?
Are you giving more than your fair share to the IRS which could be more beneficial in your hands?
That is what the Financial Design Strategy is all about. Design, evaluate and strategize, so you have more money in your pocket now and at the time of retirement, have access to more tax free income!??
Schedule a call at https://go.oncehub.com/GinaWells!? You will be glad you did!
Investment Advisory Services offered through Retirement Wealth Advisors, Inc. (RWA) an SEC Registered Investment Advisor.? Gina Wells, Advanced Capital Group d/b/a Financial Design Strategies, Brookstone Capital? and RWA are not affiliated. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Consult your financial professional before making any investment decision.