a raise! Stretch your paycheck
Most of us receive our paychecks,
pay our bills and spend the rest, not thinking about ways to make our salary go
More than 63 percent of America's workers
are still living paycheck to paycheck, according to a recent survey conducted
by the American Payroll Association, and although up-to-date wardrobes and French
manicures might provide comfort, so does having enough money to pay bills and
save for the future.
"Most people have enough money coming
in that they don't have to be diligent," says Judy Lawrence, author of The
Budget Kit: The Common Cents Money Management Workbook.
of examining ways to make their money work in their favor, most people relax into
comfortable, and often nonproductive, spending habits, says Lawrence.
are some easy ways to stretch your take-home pay.
your income to the limit
Take charge of
your salary. The first step in maximizing what you earn is to understand where
you spend money -- including $3 on a latte every morning and $10 on late fees
Lawrence recommends writing down everything
"You have to be in a certain psychological
place to do this," she says. But it's helpful to know what your lifestyle
is really costing you. Face the numbers. Once you know how much you spend, look
for little ways to save.
The next step is discovering how
your employer can help.
Take full advantage of all
the employer-sponsored benefits such as flexible spending accounts, retirement
plans and direct deposit to save time and money.
Participating in an
employee-sponsored health plan is one of the most popular ways to stretch your
paycheck. These plans allow you to pay for health care tax-free, and set aside
money in a flexible spending account to cover any costs not covered by your medical
"Pretax benefits are the way to go,"
says Steve Goldberg, owner of a tax consulting and accounting services firm in
Lexington, Mass. "If you are a salaried employee and do not own a home, there
are not a lot of other things you can do on your own to save on taxes."
Flexible spending accounts are one of the most popular options
for saving pretax dollars. The two most common types are health-care flexible
spending accounts and dependent-care accounts. Some employers offer a third option
-- a transportation reimbursement incentive program -- which is slowly increasing
flexible spending accounts allow an employee to set aside pretax dollars to pay
for medical costs not covered by insurance. The money may be used to pay for expenses
such as prescription drugs, alternative therapies, chiropractic treatments, contact
lenses, smoking cessation programs, orthodontic expenses and eyeglasses. In September,
the IRS approved paying for over-the-counter drugs with flexible spending account
money. The list of approved items is extensive, so contact your employer for an
This is how these accounts work:
You decide on the amount you want to set aside for health-care costs for the following
year. Each pay period a portion of that amount is deducted from your paycheck.
If you designate $2,400 for a health-care flexible spending account, $200 will
be deducted each month, before taxes.
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