I’m not the type of person who pays a lot of attention to politics and trending topics. When ObamaCare was the huge topic of the day I knew essentially nothing about it. When I heard that Obama had issued 2011 tax cuts I didn’t even stop to read about what they were. I just assumed they didn’t impact someone like me.
Well… as it turns out… they do. Obama decreased Social Security from 6.2% to 4.2% thus increasing my take home pay each month. The sad thing is that I didn’t know anything about this until I noticed that my first paycheck in January was larger than normal.
The cool thing about all of this? I have more money! My first thought was to just not even think about it and pretend it wasn’t there. Then I realized that was a bad idea because one thing I’ve learned since graduating from college is that money finds ways to disappear and also that you adjust your lifestyle to fit whatever amount of money you make. If you start to make more money, you adjust your lifestyle up to fit the new budget. As much as you say you won’t, you do anyway. And I do realize that the amount of money we’re talking about is somewhat minor but it is still extra income nonetheless.
So, what did I decide to do with my extra money? I setup an automatic transfer of the extra amount to my mortgage (as an extra principal payment) each month. Doing a rough calculation it looks like that small amount each month will add up to an extra mortgage payment or two by the end of 2011. Why did I choose to do this with the money? Is it the best return on my investment? Actually, no, I don’t think it will be. While an automatic transfer to somewhere is better than just leaving it in my bank account I actually think that investing this money in a nice index fund would serve me better than putting it towards my mortgage. However, given what the bible has to say about debt, I have a large desire to be rid of my mortgage in a much shorter span of time than the thirty years given to me and as such hope to continue to pay it down at an accelerated pace. I don’t trust myself to earmark an index fund for the mortgage so I’m going to make the money a straight payment towards my mortgage.
While I’ll never scoff at free money it does kind of make me cringe thinking about what the first paycheck of 2012 will be like. It’ll be like the opposite of getting a raise. I’m guessing that there will be a lot of people who don’t understand where the extra money is coming from or where it went when it goes away. The great thing about automatic transfers is that it only takes the click of a button to cancel them at the end of 2011.
Did you notice the tax cut?
Here’s a New York Times article about this subject:
And a calculator to use to calculate how much your paycheck should have increased:
Note: I guess companies have until March to get all of this straightened out and for some people their paychecks won't stabilize until then.
