Welcome to this week’s edition of our Tuesday Top 5, Econ4U’s weekly tips post to help you manage your money in five easy steps.
The secret to wealth building isn’t necessarily stock-market prescience or a brilliant business idea. Everyone starts somewhere, and it’s often just a small decision that snowballs to big rewards. Take one of the following tips and maybe decades from now you’ll remember the day you decided to invest in yourself.
- Set up automatic transfers to save without the sting. No emergency fund? Not for long. Link a savings account to your checking and set it to automatically deposit $20 every payday. If you get paid every two weeks, in less than two years you’ll have saved $1,000 virtually painlessly (even more if it’s an interest-bearing account). Just remember: No touching!
- Round up each debt payment. Say today you get a $5,000 car loan at 5 percent, payable over 36 months. Your monthly payment will be $149.85, and you’ll be debt-free in June 2013. Now suppose you round that check up to $200 per month: You’ll get rid of that loan by September 2012 and save more than $100 in interest charges in the process.
- Get a better interest rate on savings. If your savings account pays peanuts on your money, consider moving it to an online bank. Switching banks over a 1 percent difference in APY may seem like more trouble than it’s worth, but on a $10,000 balance, that ends up being $100 more in your pocket at the end of a year.
- Trim your housing expenses. If you live in a tri-state area like Washington, D.C., or New York City, you have your pick of which state to live in — which can save you money on a monthly basis if you’re savvy about it. Compare the tax and cost-of-living benefits and drawbacks of each area before you settle down somewhere with a skyrocketing COL.
- Increase your W-4 allowances. Get a big tax refund this year? Wouldn’t you prefer a fatter paycheck now, rather than waiting until next spring to collect your money back from the government? That’s what we thought. Increase your federal allowances on the W-4 on file at your company and you can put that money to work for you pronto.
4 Comments
Shouldn’t that be ‘decrease your federal withholdings’?
It’s counterintuitive, but no. If you claim 2 allowances on your W-4, your paycheck will be lower than if you claim 3 because the more withholdings, the less tax you pay each pay period. You can play around with it using this calculator:
http://www.irs.gov/individuals/article/0,,id=96196,00.html
But those aren’t the witholdings – the money that your employer keeps from your paycheck is the witholdings.
Even this quote from the referenced link would support that the article should be “decrease” or better “increase your W-4 allowances”:
“Employees who may need to increase their withholding due to the Making Work Pay provision in the American Recovery and Reinvestment Act of 2009, that caused changes to the federal income tax withholding tables and may result in too little tax being withheld; ”
Ah well, not really that important, but seems like a flaw in an otherwise good reference article.
Your suggestions are well taken, Nathan. We’ve updated the article to clarify. Thanks!