Trouble Saving Money? You’re In Luck

How the tax law changes make it impossible for you not to save money

This time of year almost everyone has money on their minds. Many of us have spent the past several weeks blowing out our budgets to buy our loved ones holiday gifts. I’ll save my ranting on that topic for another day. And, with the start of the new year, we have our resolutions to save more money or pay off debt or whatever else firmly in place.

It’s that time of year when we want to do all the right things like spend responsibly and save. That time before the drudgery of actually doing the right things takes hold and people give up on their resolutions. When they realize doing the right things is much more difficult than just talking about doing the right things.

If you’ve followed me for any length of time, you know my number one rule is to save regularly (or pay down debt aggressively if you’re in debt.) The biggest excuse I hear for why someone isn’t saving? I don’t have any money to spare! Well, if that describes you, upcoming changes to your paycheck are about to wipe that excuse away.

IRS Withholding Tables

If you’re like me, the phrase “IRS withholding tables” makes your eyes bleed. (Whoops…I probably shouldn’t have used that as a heading then. Sorry) Anyway, through “withholding tables” the IRS tells employers how much they should withhold for taxes from each of their employees’ paychecks.

You know all those deductions you see for federal taxes each paycheck and you wonder where in the world that number came from? Well, it comes from the IRS withholding tables.

If you’ve been paying attention to the news lately, it will come as no surprise that our Congress passed a law lowering tax rates. The law itself is a bit of a mixed bag for some, but most taxpayers, particular lower- and middle-income taxpayers, will owe less in taxes and see more money in their pockets.

Now there is a lot more to the law than simply lower tax rates – more on that in a future post.

Since the tax law was passed so late in the year (December 20 to be exact) the IRS hasn’t had time to update their guidance to employers on how much to withhold from employee paychecks.

That means for your January paycheck, you won’t actually see any change in your taxes withheld. BUT, starting in Feburary, you’ll start to see less, meaning more take home pay each and every paycheck.

No More: “I don’t have money to save”

If you were using this excuse not to save money, you can’t anymore. The only thing that will change in your income starting February will be lower taxes withheld and therefore more net income in your bank account.

You were already living on whatever your old net pay was, so now you can start saving the difference, right? 

How Much More Will I Get?

Unfortunately, the IRS hasn’t finished their review yet, so you don’t know the exact amount by which your net pay will go up. You only know that it will, in fact, go up. And that you can therefore start saving (or bump up your savings).

No more excuses.

What do you think? What will you do with higher net income starting in February?


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