Today’s USA Today had a tiny survey at the bottom of the Money section that had the following statistics outlined in a pie chart:

68% of people surveyed understood their paycheck deductions completely
24% of people surveyed understood some of their paycheck’s deduction
8% of people surveyed  did not understand their deductions

What I see in this is that a majority of folks grasped their paychecks deductions.  Super.  After the paycheck’s deductions did they track their money?  Did they grasp all of their tax saving opportunities?  Were they taking advantage of their 401(k) opportunities? We don’t know.  However, as a reader of this blog I encourage you strongly to figure out what deductions you’re having taken out of your paycheck, and then look for other areas where you can save on taxes or save via pre-tax spending.

One technique that some have done is to change their w-2 exemptions at the start of the year and fewer deductions taken out at the start of the year and save or invest the increase.  Then at the latter half of the year they’ll change their exemptions to have more deductions taken out of their paycheck to compensate the second half of the year.  What this allows for is for you to not give the IRS the opportunity to have an all expenses paid, interest free loan on all of your money all of the year.  Instead the tax payer watches and manages their money so that at least part of the year they are maximizing the use of their money.  I’m not suggesting you do this, but more that you way the various places that you’re letting others make money on your money.

When you think smarter about your money you’ll discover that there are plenty of opportunities to eek out small savings, small earnings and generally get ahead.  Its the old saying, “a penny saved is a penny earned,” in larger scale.  It is the appreciation of the ant saving up for the winter.  One kernel at a time.  One dollar at a time.  The paycheck deduction is a start, its financial knowledge to a point.  However, you don’t want to stop learning.  My father was on a committee at one job that was in charge of putting together benefits packages including investment opportunities that were offered in the company’s 401(k).  Under the direction of the team and in part due to the help of my dad, the employees at the company were able to save thousands of dollars in taxes and earn thousands in investments that were wisely chosen.  Employees could maximize their savings for each paycheck.  Are you?

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This entry was posted on Thursday, August 23rd, 2007 at 9:11 pm and is filed under Money Management, Outside the Box. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site. No tag for this post.