4 Ways You May Boost Your Income Today

Income can be a confusing topic. How much do I actually make? How much tax do I need to pay? How much am I supposed to claim on my W-4? What are the employer benefits my company offers?

Oftentimes confusion on these subjects can mean that you lose out on free money or, worse, lose money. In my case, I was leaving a company and had set aside money for a commuter benefit plan every paycheck. When I left the company, I was very close to actually giving up hundreds of dollars from that plan. Instead, I ended up putting the money into future public transit, which allowed me to not forfeit

Here are four potential ways that you may be leaving money on the table.

1) Claiming too little on your W-4 tax form

Many individuals claim a 0 on the W-4, knowing that the benefit at the end is that they will receive a much needed check from the IRS. Some people depend on this amount to pay off high interest credit cards or other forms of debt.

I understand one of the reasons people do this is because they do not trust their own ability to save throughout the year. The problem is that they could be using that money throughout the year to pay off high interest credit cards or they could be putting that money into a high yield savings account.

Here’s what I would do: Find a free withholding calculator to get a baseline of what you should claim. Increase the W-4 amount to an amount where you won’t get money or won’t owe money during tax

When you receive more money from your paycheck, make sure to automatically deduct the amount that would have been going to your IRS refund and send it to a high yielding savings account. Many banks have interest rates of or around 2.20%. I personally use Barclays, which offers a 2.20% during the time this article was written. Don’t touch it!

Let’s say you would have potentially received a check from the IRS for $8,000. This amounts to an additional $153.84 per paycheck for a 52 weekly pay period.

If you have no debt: You can have your employer automatically deduct the $153.84 and sent to a high yielding savings account. After 1 year, you would have accumulated over $100 in interest.

If you have debt: You can use the additional $153.84 per paycheck to pay off high interest credit cards of 30% APR. This would save you even more.

2) Not Taking Advantage of a 401k Match

This can literally be free money. Many people will not do this because they do not want to lock away funds into an account, and they know there are penalties if they retrieve the money early.

However, not everyone does the calculations which show that they would receive more money even with the early withdrawal penalty than they would if they didn’t invest in a 401k in the first place.

Here’s an example: Your company provides a 100% match up to 5% match on your gross salary. Your gross salary is $50,000 per year. For a year, your company would provide $2,500 if you provide $2,500 (ie. would match your $2,500, 5% of $50,000). I won’t get into the specifics of tax liability, but let’s say you leave the company and need to withdraw the $5,000. Well, there is a 10% penalty for early withdrawal, so you would pay $500, but your net amount is still $2,000 ($2,500 – $500).

3) Getting Too Much Healthcare

Healthcare is expensive.

When both spouses work and the employer provides medical insurance, there could be double coverage. The important thing to ask yourself is whether you need double coverage. If you don’t, you should consider calculating the costs of each healthcare plan to determine which is best for you.

On the other hand, it may make more sense for each spouse to have his/her own plan from their employer if the employer covers most of the employee’s healthcare cost and not the spouse’s healthcare costs.

4) Not taking advantage of a 15% company Employee Stock Purchase Plan

Many publicly traded companies provide an Employee Stock Purchase Plan (ESPPs), which allows you to purchase your employer’s stock, usually at a discount of up to 15%.

For example, your company allows you to buy the $100 share at $85 and then you are able to sell that share at $100, if the stock retains value. This means you would receive $15 in profit upon sale. If you sell the stock today, you will still see a free money benefit from taking advantage of this plan.

What’s Next?

There are many opportunities where you could be leaving free money on the table with your employer, so it is a good idea to look at your employer’s benefit plan to see whether any of these options exist for you.

In this article, we focused on simple ways you may be leaving money on the table. If you’re in debt, we wrote at article titled, 5 Practical Steps to Debt Freedom, if you’d like specific insight how we use a simple step based method to help people get out of debt.

This article by Ben Tejes first appeared on Ascend Blog and was distributed by the Personal Finance Syndication Network.

The post 4 Ways You May Boost Your Income Today appeared first on Personal Finance Syndication Network.

About Damon Day

As a Debt Coach and a Financial Advocate, I have saved my clients Millions of Dollars by exposing the debt relief scams that other consumers fall victim to. I work directly for my clients to create custom debt relief strategies based on their own unique circumstances. Consumers who speak with me first, come out far ahead of those who don't, every single time. Guaranteed. +Damon Day