I just caught a segment on The Today Show about personal finance. This was called “Give Yourself an End of the Year Bonus.”
The segment started out talking about how the majority of people didn’t get a year-end bonus this year (I didn’t, but my co-workers did – I haven’t worked there long enough). And while you may not have gotten a bonus, there are ways you can give yourself a bonus by saving money in the coming year. They gave three suggested ways to give yourself a bonus.
1. Pay attention to spending
- save 15% of your income
- pay attention to what you’re buying
I don’t think any of this is news to people who pay attention to their finances, but it is always a good idea to remember these two elements. I know how much money I save in a month, but I’m really not sure what percentage of my income I am saving. That’s something I plan to look at when I get home from my Christmas vacation. As for paying attention to what you’re buying, I think that’s something we all can take another look at. Some days, when I go to the grocery store, I am very exacting about what I buy. Other times, I just buy at random and may not be making the best choices, either nutritionally or financially.
2. Change the allowance on your W-4
This was probably the most eye-opening part of this segment. While I inevitably end up breaking even or owing money to the government due to investment income, apparently, the average tax-refund is $2200! That is $2200 that you’re loaning to the government for free! You could very easily save that money in a high-yield interest rate yourself and have even more money when it’s tax time.
I do know people who like the fact that the government holds the money for them because it keeps them from spending it. If your spending is that uncontrolled, then perhaps letting the government hold your money is the best plan, but I have to believe there are other ways you can keep from spending your money.
3. Cut your taxes
- Put money into your 401k
- Take advantage of Flexible Spending Account
These are two great ways to reduce your taxable income, and great ways to save. The recommendation was to put the full allowable amount into your 401k, but at least put in up to the match. I agree with the match part, but from everything I’ve read, you should put the rest of your income into another investment account, because you will make significantly better returns.
A lot of people don’t like to use FSAs because if you don’t use the money by the end of the year, you lose it. It is worth it, however, to sit down and figure out just how much money you will use on these types of expenses. At the very least, figure out what you pay for any medications you use year-round and for your annual physical. Those are guaranteed expenses. It might not be a huge reduction, but I figure any reduction in your taxes is a good thing.
Overall, these ideas made me think, but didn’t tell me anything I didn’t know. But I’m sure a number of people have benefited from these savings tactics.