Treat your two percent right

Under the current tax law, more than 150 million Americans are “enjoying” more take-home pay these days because of the payroll tax reduction. Social Security as you knew it was reduced from 6.2 percent to 4.2 percent for those who earn up to $106,800.


So in real numbers, if you make $50,000 per year, you have seen an extra $19.23 per week or $1,000 for the year. If you are on the higher end, your pockets are bulging with an additional $2,136 per year.


Now, if you follow any of the current legislative debates, news talks, or pundit gab, this raise will undoubtedly remain a temporary moment of indulgence (slated for 2011 only). Let me inject a little cynicism here. Coincidently, during the same time your favorite Uncle Sam was rewarding you for being such a dedicated patriot, the Work for Pay credit (up to $400 if you made less than $75,000 per year) was axed. Windfall or gimmick — you decide.


Now that we are on the downside of the year, what have you done? Feeding the pig with your extra cash, or supporting Congress’ agenda expecting you to use your windfall to stimulate the economy? Buy more, save nothing?


It’s not very logical or prudent to expect the poor and middle class to spend more of their own money. Surely this is not the way out of financial mayhem?


Perhaps I missed that class just like I missed the class on losing 10 pounds by sitting on the sofa watching The Biggest Loser. If consumer spending is the solution, then I think we need to rethink the question.


Let’s ask a monetarily rich person if they got rich by spending more money. I guarantee their extra money was not invested in nondurable consumable goods.


For sure, spending creates a healthy economy, but so does personal earnings and production. This is like a three-legged stool, and when two of the legs are missing — crash.


Here is a bit of economic reality: The Consumer Price Index states wholesale food prices rose 3.9 percent this year, the biggest spike since 1974. Not to mention the skyrocketing energy costs that are having most of you rethinking the layered look in your homes. These costs have risen over 15 percent in the past 12 months.


Consequently, your two percent may feel like it’s gone before you even get to touch it. So, is there really any defense against these rising costs?


Well, the jury is still out, but it ultimately depends on who you ask. An investment banker or broker will tell you that equities are the only defense against rising costs and long-term inflation. A prudent financial advisor will recommend that you increase your monthly savings and diversify to hedge against the economic ups and downs.


Nevertheless, if you follow the government’s philosophy, everyone gets paid — from the inventor to the manufacturer to the retailer to the government (yep, sales tax).


Oops, who’s missing in this equation? You!


So, it’s not too late to be logical with your two-percent bonus. You deserve to have it work for you. Consider investing it in something that could potentially offer a return on your investment (tax favorable, preferably).


Moreover, I am not only referring to stocks, bonds or mutual funds. Get creative. The operative words here are “return on your investment.” This could present several opportunities.


How about seed money for the small home-based business you have been thinking about? Invest the extra in yourself by taking a class or two on a subject that will propel you to the next level in your craft or discipline. My favorite is to invest in your children with things such as scholastic camps, extra tutoring, culturally rich travel, language and imagination software (not Xbox 360 games), and last but certainly not least, an Education 529 Plan.


There are just as many assets as there are liabilities to put your money into. Make a real difference with your two percent.


Freelance writer, financial consultant, entrepreneur and mom, Tamela Saulsberry brings a combined 16 years of experience in business, finance, sales and coaching. She is delighted to receive your questions and feedback at or 612-269-2341.

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