Interviewer: By now you will have noticed that your paychecks are a little bit smaller forcing you to find some ways to maybe stretch your dollar. Financial adviser, Matthew Stout is here from Stout Bowman and Associates with some ideas on how to offset this loss that we are all seeing. Came as a shock, really, to some people. Some people knew it was coming.
Interviewer: What can you say to everybody out there saying, "I don't know how we're going to make ends meet."
Matthew: Well, when you got your first paycheck this month, this week, you're going to notice, it's a little bit lighter.
Matthew: Why is that? Two percent more backend for the social security payroll tax. If you remember, this was a temporary cutback in 2011 to help stimulate the then-struggling economy.
Matthew: So it's not necessarily a new tax or a raise in tax. It's kind of setting back to what the original rate was.
Interviewer: So what can people do at home now?
Matthew: Well, there's a number of things you can do. First thing is take a look at the IRS themselves. And again, if you're getting a large refund, if you're one of these people that get a few thousand dollars in a refund, you have to realize that's an interest-free loan that you're giving to Uncle Sam throughout the course of the year. So how are you going be able to make up for that difference is what you want to be able to do is go back into your employer, ask for a new W4. At that point in time, you're going to up your exemptions a little bit. That's going to put more money into your paycheck immediately, help to offset some of that 2%. That's one of the quick things you can do, very easy if you're getting the tax refund.
Matthew: But let's say you're not getting a tax refund, you owe some dollars. So in some other ways, you can take a look at is to make sure that you held these auto drafts that you have coming out of your bank accounts.
Interviewer: Yes, those can be expensive.
Matthew: Are they absolutely necessary? Do you remember what some of those are?
Matthew: I mean you have some old accounts that are drafting $15, $20 a month, you forgot about them, they're still pulling money out of your account.
Matthew: If you're living paycheck to paycheck and some of those overdraft fees start to add up, make sure you know what you're spending. Banks can get pretty aggressive with some of those fees. Here's also a great time, if you haven't refinanced your home, you're able to do so. If you haven't done that in the last three or four years, rates are pretty much at an all-time low. They should start to be moving up. Sometimes, that's going to be an easy fix for people as well.
Interviewer: And can you actually negotiate with them?
Matthew: Oftentimes you can. I think the key you want to make sure is to let the banks know that you're shopping around. That you're looking for a better deal. If you're a good customer and you pay your mortgage regularly, they want to keep you. And they know what the rates are and if your rate is at 6%, 6 and a half percent and the going rate is between three and a half and four and a half, they know you're going to be looking around and they want to keep that business.
Matthew: Your biggest investment, an extra percent or two off paying interest on that, that's a huge dollar amount as well for people.
Interviewer: Of course, that's gonna depend on how long you want to stay in your home, right?
Matthew: Exactly. Rule of thumb is gonna be about three years. If you're gonna move within three years, I think some of the fees and expenses that could come with refinancing will be a wash for you.
Matthew: But if this is your home and you're gonna stay there for the next 5 years, 10 years, 15 years, and pay off this home, every interest rate percent you can cut now is a big saving as well.
Interviewer: All right, Matthew Stout from Stout Bowman and Associates, we appreciate your help.