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Consumer
Make the most of extended payroll tax cut
SAN FRANCISCO (2/28/12)--Many consumers will continue seeing a few extra dollars in each paycheck through the end of 2012; Congress passed and President Barack Obama has signed a $143 billion measure to extend the payroll tax cuts (SFGate.com  Feb. 22).

But consumers will have difficulty making responsible financial decisions with the modest windfall if they're not aware that the funds are in their paychecks. A recent poll by the National Foundation for Credit Counseling  (NFCC) suggests that 66% of workers did not know that existing payroll tax cuts provided them with fatter checks in 2011 (nfcc.org Feb. 20).

If you are like those workers, you might not be making the most of these dollars and could be spending them in ways that aren't best for you. Here are several ways to put the payroll tax cut dollars to good use:

  • Create a budget. Planning daily, weekly, or monthly budgets will help you identify where you're spending. Once you determine your income for a period, plan how much you'll spend on expenses during that time. Be sure to include funds for unexpected expenses.
  • Cut routine costs. Find ways to cut down on necessary expenses. Unplugging electronics like TVs and gaming systems, turning off lights when you aren't using them, keeping your thermostat at a steady temperature of around 68 degrees, combining trips to save on gas, and buying generic items instead of brand name goods at the grocery store are all ways to reduce the cost of routine expenses.
  • Clip optional spending. Identify which expenses are discretionary and look for ways to trim them. For example, replace going out to dinner with renting a movie, cancel magazine subscriptions, and consider removing cable TV. Reducing your spending a little here and a little there will add up.
For more information about reducing your spending, use the calculator "What's it Worth to Cut Back My Spending" in the Home & Family Finance Resource Center.
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