CHARLOTTE — Controlling your costs is always important. There are many ways to save money that you may have never thought about.
An expert told Channel 9′s Scott Wickersham that people make three key mistakes in their paychecks that can make a big difference in your wallet.
Anne Roberts teaches financial responsibility at Central Piedmont Community College and says many people don’t think about paycheck deductions when it comes to savings.
The first one you should be mindful of is tax withholdings. If you got a big refund from the IRS this spring, you need to adjust your W-4 tax withholdings to have less taken out of each paycheck.
“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,” Roberts said. “But they’ve had that money all year long. And the truth is, an emergency. You need that money.”
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Roberts said the IRS changed the W-4 in 2020 and if you haven’t checked yours in a while, it may be time to do so.
The second deduction to revisit is medical insurance. Roberts says things like disability coverage, flex spending accounts and life insurance may not be the priority for everyone right now.
“When you’re young most of the time, like a long term disability policy, probably not the most effective use of that money,” Roberts said. “So some of those types of things, it’s time to reevaluate. Are you using them? Would you actually use them?”
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Lastly, a pre-tax deduction that many people think is smart, could be a mistake, according to Roberts. If you have a lot of high interest debt, making payments to a 401K retirement plan may not be the best idea.
“I am countercultural on 401k plans,” Roberts said. “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 401k deductions.”
Roberts also says 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.
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