As expected our saints in Congress “came through” at the last possible moment to kick the proverbial debt, tax, and spending can down the road for a little bit.
A deal was struck, the middle class was “saved” — or was it? — and everyone can focus on using this small planned victory in the next election cycle.
…said the cynic.
Nonetheless your taxes won’t be jumping up by 27% next year. Instead, a 2% discount in the Social Security tax that has been in place for a few years will disappear. Many will moan and complain about having less money in their pockets and how this is a tax increase. I see it more as you used to be able to use a coupon someplace, but now the store isn’t accepting 2% off coupons anymore. The drop from 6.2% tax to 4.2% was meant to be temporary to boost the economy.
Considering the rate has been 6.2% since 1990, hasn’t been below 5% since 1973, and hasn’t been below 6% since 1988… I’d say it is the removal of a discount. But people will still complain about losing 2% next year, and that’s understandable I suppose. Just realize that you shouldn’t have had that extra 2% for the last few years, move on, and try to save or earn more money this year.
You can cover that extra 2% in Social Security tax easily by implementing a great financial plan to pay off your debt, earn more money, and save for a rainy day. Here are some articles to help you do just that:
Financial Blogger Conference | Things I Wish I Knew When I Started Blogging
CNN Money | Can a $1 trillion coin end debt ceiling crisis?
The Empowered Dollar | 2013: Why this is the Year of Quiet Persistence
Bloomberg | Almost All of Wall Street Got 2012 Market Calls Wrong
Boomer and Echo | Monthly Financial Planning Checklist
Get Rich Slowly | Romanticizing Poverty and Learning Financial Independence
Len Penzo | What It Really Feels Like to Be a Billionaire
Good Financial Cents | The Debt Movement: Taking Down $10 Million of Debt in 90 Days, Together
Bible Money Matters | Avoid the Distractions and Keep Your Focus on Your Goals or You’ll End Up with Empty Pockets
Free From Broke was featured in the following carnivals this week:
Nerdy Finance #20: Welcome to 2013
Carnival Of Personal Finance – Happy New Year’s Edition
Festival of Frugality » Blog Archive » Festival #368 – Last Festival of 2012!
Lance @ Money Life and More says
I’m not surprised at all that the can got kicked. I just hope people are aware their paychecks will be smaller. Based on what I’ve seen though no one really expected it…
Glen Craig says
They will be smaller but they could have been a lot smaller without this deal.
Really, no one expected it? Or is it that most people just didn’t understand the credit? Because it seemed to me that the payroll cut was meant to be temporary and I heard nothing that said it would be extended.
Andrew @ Listen Money Matters says
That’s a good point, it should be a call to action for all of us to increase our savings by 2%. We can slowly work towards saving our country’s fiscal situation and ours at the same time. 2% is so tiny, maybe seeing how easy it is to reduce spending by that little amount can inspire a whole lot more savings!
Jane Savers @ The Money Puzzle says
What about the coming debt ceiling negotiations? Will your American government make real changes to reduce or at least stop increasing debt or will the debt continue to increase?
I am your Canadian neighbour and I am waiting to see what will happen.
Glen Craig says
Negotiations in a couple of months will be interesting to say the least.
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