Monday, October 20, 2014

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Many bringing home less in their paychecks

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CNY/NNY/S. Tier: Many bringing home less in their paychecks
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Many people are getting their first paychecks of the year this week and if you noticed a difference, you're not alone. The expiration of the payroll tax reductions means more money out of the pockets of all Americans. Our Iris St. Meran has the details on the tax and some money saving tips.

UNITED STATES -- On social media sites, many people pointed out a two percent difference in their paychecks. For most people, that means between $20 and $40 each paycheck. But there are things you can do to make up for the difference.

Many people are getting their first pay check for 2013 this week and judging from discussions on social media sites, they've also noticed, they're getting two percent less.

"It's really not an increase in the taxes, it's just a removal of a tax reduction. For the past two years, we've had a two percent decrease in the payroll taxes. That expired at the end of 2012," said Certified Public Accountant Ron Pratt.

The payroll tax rose from 4.2 to 6.2 percent. As a result, most people will see between $20 to $40 less with each paycheck.

For someone making $30,000, that's approximately $600 less over the course of a year.

At Clearpoint Credit Counseling Solutions, Counselor Kiesha Johnson says you should have a budget.

Johnson said, "You definitely want to track for at least 30 days so you can get a good understanding of where you're spending your money. This should be something you put into your lifestyle a little at a time. The more that you're doing it, the more you're paying attention to what's going in and coming out. And you're paying more attention to what you're spending."

Avoid eating out. Bring your lunch and coffee if that's a daily expense. Use coupons and pay down high interest credit cards.

Once you know where your money is going and you don't have a savings account, get one. Pratt says putting as little as $20 away every paycheck into a savings account is helpful over time.

"I like to tell people to have a separate savings account setup so it doesn't get blended into your everyday checking account. We have a tendency to spend money if it's sitting there," Pratt said.

Since you'll be in the saving mode, the goal should be to have three to six months of your income saved up. That's important in case you run into a financial situation like being laid off or an unexpected medical emergency.

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