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Payroll tax cut expiration means smaller checks, creative budgeting

By Paul Nelson | Posted - Feb 22nd, 2013 @ 8:03am

SALT LAKE CITY — After the payroll tax cut expired at the end of 2012, many financial counselors expect people will see smaller paychecks. However, there are ways people can find the budget that works for them to help them make up the difference

Whenever paychecks get smaller, the first step people should take is evaluating where each paycheck is going, according to AAA Fair Credit Foundation President Preston Cochrane.

"You have to take a step back and look at where your spending is going," he said.

Cochrane said the average person will have to pay about an extra $700 in taxes in 2013. But finding the budget that works for each household may not be an easy process; it might take months of trial and error.

"I've seen everything work from the old-fashioned envelope system to folks that go strictly online with budgeting software and use online banking to pay their bills," Cochrane said.

Utah Saves Weeks Events in Salt Lake City
  • Tuesday, February 26th: Preventing Foreclosure and Saving Money on Computers
  • Wednesday, February 27th: Personal Money Management Fair
  • Thursday, February 28th: The Drive to 850 - Credit Score Improvement
  • Saturday, March 2nd: Investor Education Seminar: Crowdfunding — Is it Right for You?
  • Source:Utah Saves

Finding the system that works for each individual is a key factor in figuring out a budget. People who avoid cash and use debit cards instead may like to use smartphone apps that can help them track their spending. These apps allow users to set aside certain funds in categories, like clothing and transportation.

"That money gets deducted every time you make a purchase and you can see those categories," Cochrane said. "Or, if your partner makes a purchase, if it's a shared budget, you know if your partner spent something, as well."

People who don't want to use smartphone budgeting apps may choose a more traditional route, like spreadsheets for their computer. Another common system is using envelopes; people put certain amounts of cash in envelopes for things like food, gas and clothes and they're only able to spend what they put in the envelope. People can also use an old-fashioned cash register, Cochrane said.

"You (see) the cash that comes in, the cash that comes out and you treat that just like a checking account," he said.

America Saves Week starts Monday and there will be a series of local events held by the Utah Saves Campaign to help people of all income levels find ways to save money.

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