The Sates of Money Series: Earnings

In part 1 of this series I talked about how, just like any element on the periodic table, money takes on three distinct states: earnings, savings, and spending. Now let's focus on one particular state, earnings.

My Question

What do you do with your paycheck?
   A. Don't open it and toss it in the shredder.
   B. Open it and see if the pay line is close to "normal".
   C. Open it and review that the pay and deduction figures are correct.

If you chose option A (Don't open it, and toss it in the shredder) then we have a good bit of work ahead of us. Keep reading and remember hope is not lost, because frugality is a learned trait. Now for those who chose B or C, and open your check. Please know that you are atypical, and you have developed some frugal tendencies.

My Challenge 

Everyone go find an old paycheck - really go grab one - now open it and look past the pay line. It is likely you will be presented with several lines of purposefully confusing deductions. Many relate to benefits from your employer, and the rest are for good Ol' Uncle Sam.

For your employer’s deductions you need to ensure two things. First, make sure the amounts leaving your paycheck match the amounts you expect...HR is not infallible. Annual elections get missed, and payroll entries get "fat fingered" all the time. In the past I have found several small issues that were caught by a simple 2 minute review. If the issues would have gone unnoticed; however, it could have been a headache at tax time.

Second, you need to know what you are paying for. HR is required to keep documentation on all of your benefits. Get a hand full of pamphlets and start reading. You may find something valuable, or you may also find you are wasting money.

Through this same research process I found many hidden gems. For example, one of my current benefits is an identity protection service. This service is free to employees, and  has the same level of coverage I was paying Zander $10 a month for (I still recommend and admire Zander). I also found I was eligible for PerkSpot.com, an employer sponsored shopping portal that saves me a good deal of money through coupon codes.

Next up in this series we will continue our discussion on earnings by focusing on Uncle Sam's share.

Disclaimer: Let me be clear, I am not a tax adviser and I do not, in any way, profess to offer tax, legal, or investment advice in this blog.  Visit the IRS website and see if you are overpaying.