So what are you doing this year with your raise? You mean you did not know you got one? Well unfortunately, I am a little late in reminding you, but due to legislation passed last year, everyone who pays into social security this year will pay 4.2% of their salary up to $106,800 which is down from the normal 6.2% that employees normally pay.
So what does that mean for you? It means that every working American received a 2% raise this year! So for every $25,000 you earn in income, you will pay $500 less in taxes. You can use your extra money in a variety of ways in the form of increased savings for emergencies, paying down consumer debt, or putting extra into your 401(K) or IRA. You could even use it to offset the rising price of gasoline.
Be careful, though, to avoid putting the raise into lifestyle. The decrease in taxes is good only through 2011, so putting the money into your budget for eating out, shopping, or entertainment could cause an ouchy when you have to reduce those amounts in 2012.
Although 2011 is already one third of the way over, you can still take advantage of this temporary “raise” by improving your financial condition. What are some of things you are spending your raise on?