Articles - Archived Expert Advice

Put Extra Money to Good Use

Over the past few months, I've noticed my take-home pay has increased. What's the best way to make this extra money work for me?

In January, many people noticed an increase in their take-home (net) pay. To be precise, it should have increased by 2 percent. This increase is due to a Social Security tax holiday for 2011. Before you get too excited, you need to know this increase is only for one year. Next January, your take-home pay will decrease by 2 percent. With this one-year increase, you have several options available. You can choose to increase your 401(k) or 403(b) contribution by 2 percent, put money into an IRA or Roth IRA, use it to pay down debt or build your emergency fund. You may even want to challenge yourself to commit the full 2 percent to one goal, thereby making a large impact in one area of your life.

Let's assume you make $29,000 a year. Right now, you're seeing an extra $48.33 in your monthly take-home pay. By investing this $48.33 for the next 20 years, you could end up with $28,469, assuming an 8 percent return. Your profit on the investment would be $16,869!

Putting the money toward your emergency fund or paying down debt will also strengthen your long-term finances. Regardless of what you decide to do, you're investing in your future without realizing a loss in your take-home pay. If you would like help deciding on the best option for you and your family, contact an LGFCU financial counselor at 877.367.5428.