cutting the budget, Part I

By now you have likely received your first full paycheck of 2013, or your husband's full paycheck if you live in a traditional household. Did you notice it was smaller, maybe by a little, maybe by a lot?

Why?

In case you don't know the reason for that smaller check, it is primarily due to an increase in your (or your husband's) payroll tax. Payroll tax is the cost (one of many) of having a job -- yes, you are penalized in this country for earning a wage. The payroll tax -- aka Social Security Withholding Tax, aka OASDI, Old Age, Survivors and Disability Insurance -- had a two-year holiday, going down from 6.2% to 4.2% of a maximum $113,700 earnings. The Obama Administration gave us the holiday two years ago, and then the Obama Administration took it away.

I won't debate the reasons we got the holiday (I say it was to "buy" votes -- you can disagree but I am not debating), but the reason we lost the holiday was because there are over 3 million more people are on Social Security Disability Insurance (SSDI) now compared to when Obama was elected the first time. People who are on disability insurance not only receive a check from the government, but they receive healthcare benefits (Medicaid). That is a huge drain on Social Security, which experts estimate will be bankrupt before 2018 -- that's not far down the road. The government is trying to catch up on all that money lost, both by the tax holiday and the drain on SS.

I won't get into why so many more people are on disability now, compared to two to three years ago, but let's just say many factors (Obama stimulus plan, increased taxes on small business owners, Obamacare, just to name a few) created a perfect storm of fewer jobs and almost no motivation to keep seeking work after unemployment insurance runs out (which varies from state to state). Though there are many people legitimately on disability, there are a lot, a lot of abusers out there -- people who ran out of unemployment and just plain didn't want to work anymore -- work all day or sit on my butt and watch television all day? Hmmm. I saw a photo a few months ago, taken at a Social Security Administration office waiting room. Remember when social security was for retired people? I don't see any gray-haired people in this room and I don't think hair dye is the reason.

The reasons why are somewhat beside the point. The fact of the matter is, we have less money now than we did last month. If you or your husband earn more than $113,700 a year, you only pay 6.2% tax until you get past the $113,700 mark. After that, you are not taxed for the purpose of SSDI, and your take-home will go up the amount the government currently takes from your check (on your pay stub it shows up as OADSI tax). If you make less than $113,700, I am sad to say you will be taxed for the entire year (sad face).

I firmly feel that whether your family income went down $200 or $2000 you are feeling it. We all find ways to use our money, even those with more. I am grateful we have always had a little less and I don't have to worry about making a second mortgage on a home in Florida, or a monthly payment on a large boat, a time share, etc. I do have to find a way to make the mortgage, car payments, tuition payments, insurance, etc. I know the bank won't take less for my house, and the school won't take less for tuition.

The increase in the payroll tax zeroed out most people's cost of living increase. The cost of living still went up, but if you received a raise last year for cost of living, it was likely between two and three percent, the same as the increase in payroll tax. The price of groceries sure went up, the cost of gasoline, clothing...all those things we spend our money on. If cost goes up but income stays the same or goes down, we have to cut where we spend.

I am no financial wizard. I can't tell you where to invest your money, or how to earn more. I have, however, been managing my household for over 25 years and I have lived through some mighty trim times. When I quit work to take care of my first baby, we cut our family income in half. That was hard, I'll tell you. You figure out what is important and what isn't real quickly.

I hope I can share a few tips with you. Whenever I read a list of "what to do to save money" I usually get defeated very quickly, because I am already doing everything most people do first. Maybe I can help you in an area you haven't tried. Remember, we're all in this together, in more ways than one.

Stay tuned for Part II...