JACKSONVILLE, Fla. — Action News Jax is here to help you battle inflation. A financial expert we spoke with said you can squeeze more money out of your paycheck in three ways.
REEVALUATE YOUR TAX WITHHOLDINGS
Anne Roberts teaches financial responsibility at Central Piedmont Community College in Charlotte, North Carolina. She said many people don’t think about paycheck deductions when it comes to savings.
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First, your tax withholdings. If you got a big refund from the IRS this spring, you need to adjust your W-4 tax withholding form to have less tax taken out of each paycheck.
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“Well, you’re making an interest-free loan to the federal government, right? So no interest is paid to you at the end of the year. But they’ve had that money all year long. And the truth is an emergency. You need that money,” Roberts said.
In 2020, the IRS changed the W-4, so it may be time to do so if you haven’t checked yours in a while.
INSURANCE COVERAGE
Take a closer look at the money coming out for things like disability coverage, flex spending accounts, and life insurance. Those deductions may not be the priority for everyone right now.
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“When you’re young most of the time, like a long-term disability policy, probably not the most effective use of that money. So some of those types of things, it’s time to reevaluate. Are you using them? Would you actually use them?” Roberts said.
Roberts also said that if you and your partner both have health insurance coverage at work, make sure you are not paying for more coverage than you need.
DEBT VS. SAVING FOR RETIREMENT
One pre-tax deduction many people consider to be very wise is money put into a 401(k) retirement plan. But some experts say you may want to scale back if you are carrying a lot of credit card debt.
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“I am countercultural on 401(k) plans. On 401(k) plans, my idea is this: if you are paying a lot in interest and you are maintaining credit card balances on credit cards and you really need to focus on paying down those credit cards, then you might want to consider suspending those 401(k) deductions,” Roberts said.
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