How to Maximize Your Paycheck
Sometimes getting your paycheck to cover all your expenses can feel like carrying water in a leaky bucket – by the time you get where you were heading, it’s empty. With nothing leftover, building financial security can seem impossible.
Here are some simple tips to help maximize your paycheck by utilizing budgeting tools, taking advantage of employer offerings, and plugging some common money drains. Being diligent and thoughtful with every dollar you take in can help build a foundation of financial wellness.
Use automatic transfers to take control
Your paycheck doesn’t just cover day-to-day needs – it also must support your overall financial wellness. That includes emergency savings, debt reduction, even investing for retirement. Directing money to those purposes automatically, like auto-paying credit card debt and directing dollars to an emergency savings account every month, makes it easier to stay on track, since you won’t miss money you never see.
Check where “disappearing” money went
If your paycheck seems to melt away before your eyes, find out where it’s going. Check your bank statement closely and add up what you spend on various categories. Watch for recurring monthly charges. It’s easy to get signed up for subscription apps, streaming services, and sites you don’t use. Those little costs can add up to a big number. Cancel subscriptions you can live without and budget other discretionary spending if needed.
Say yes to free money offered in employer matches and benefits
Many employers will match part of what you put aside for retirement. If available, contribute at least enough to get the maximum match – that’s free money. Also, some employers contribute to health savings accounts for employees; if an HSA makes sense for you, this is another reason to choose it. Optional low-cost, employer-sponsored insurance policies or transit benefits may also help you save money and gain security.
Flex spending accounts can reduce your tax burden and set aside money
Some employers offer flexible spending accounts for health and childcare. These allow you to set aside pre-tax money for these uses, lowering the amount taken from your paycheck for taxes. And since you can pay for out-of-pocket health expenses and childcare from these accounts, less of your take-home pay is used for these things.
Watch how you use debt – it can drain your paycheck
If you build up credit card debt or other loans, more of your paycheck will be needed to pay down the debt and interest every month. Debt can be useful and sometimes necessary, but avoid using it to buy something you could otherwise save for or to pay for ongoing living expenses. Every dollar you spend on interest or to pay off yesterday’s expenses is a dollar you don’t have for today.
Everyone’s situation is different – the opportunities and needs in your life will not exactly match anyone else’s, and your values and priorities will influence what a “maximized” paycheck looks like for you. The advisors at Alerus are happy to help you come up with a plan that works for you, no matter what your life stage or income. Set up time to meet with an advisor, and together we’ll find ways to get the most out of your money – and more importantly, more of what you want out of life.