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Missing from discussions about the so-called fiscal cliff is the option to continue the payroll tax cut. To boost the economy, President Obama and Congress introduced a stimulus bill in 2010 that reduced the payroll tax, money collected at the time of each paycheck from employers and employees (workers with W2 forms).

The employee’s share of the tax has normally been 6.2 percent with a built-in ceiling. The ceiling ensures that those earning $110,100 or less pay the full amount of the tax, but those earning more pay no more tax than those earning the maximum, lowering their effective payroll tax rate. Earn $1 million as a W2 employee, and you pay only 0.07% towards the payroll tax.

The payroll tax funds Social Security. Watching the government can be interesting. As we observed while the country was beginning to dip into the recession, political rhetoric moves quickly from finding ways of boosting Social Security to adopting a tax cut which could accelerate the supposed demise of this government program. Once the idea of a stimulus today became more important than preparing for tomorrow’s realities, the conversation focused on reducing the payroll tax.

The stimulus bill reduced the employee’s portion of the payroll tax two percentage points, from 6.2 percent to 4.2 percent, and that change has been extended several times. The payroll tax cut is set to expire tomorrow, January 1, 2013, and neither the President nor the Congress has discussed extended this particular tax cut. Your first paycheck in 2013 will reflect the higher payroll tax rate, reducing your net take-home pay.

Regardless of whether income tax rates remain low or are returned to their levels before President Bush oversaw his round of income tax cuts, net pay will be lower in 2013 than it was in 2012. In general, with all other things being equal (which they never are), someone earning $50,000 will see $83 less each month.

There’s still time. Congress could decide at a later date to reinstate the payroll tax cut. It could take effect retroactively, which mean the government will take less from each paycheck going forward to reach the desired rate by the end of the year. Or the government could reduce the rate in the middle of 2013 without any concern for what has already been paid by employees. Either way, an extension of the payroll tax cut seems unlikely to me because it hasn’t been discussed in fiscal cliff negotiations thus far.

Employees should start planning today for the reduction in take-home pay. In this article, I’ll assume that net income will be reduced by $100 per month. That’s going to be a high estimate for most people affected by the return to the higher payroll tax rate, but it is a nice round number. If you plan for the worst, you’ll be pleasantly surprised when you end up with a more favorable cash flow.

Reduce your spending by $100 per month

If you already have a well-defined monthly spending budget, find an area where you can shave $100. Resist the urge to save less. Don’t sacrifice your savings and don’t reduce your contributions to retirement due to the payroll tax cut. Find the difference in spending rather than saving.

  • It may be time to drop Showtime or HBO, particularly if you signed up during a promotional period and are now paying full price to your cable company. Dropping some services might trigger a new deal that could save you money.
  • Re-evaluate your mobile phone plan, particularly if you’ve expanded your service to include data for tablets over the past few years.
  • How much money are you spending on clothing, particularly if you have children? If you’ve felt the economy improve over the last few years — and not everyone has — you may be spending more than you did in 2008 for expenses like these.
  • Note that gas prices have been declining. If you drive often, such as having a daily commute to work, you’ve probably seen your expenses drop already.

If you don’t have a budget and you don’t track your spending, you might not be aware of your opportunities for spending more efficiently. Start tracking where your money goes so you can better identify the possibilities for reducing your spending by $100.

Increase your non-payroll income by $250 per month

It sounds like employees are burdened by payroll tax, but self-employed individuals deal with it more. When you’re self-employed, you need to pay the employee’s share of the tax as well as the employer’s share. Self-employment income can come in different forms. You may be working for yourself in your own business, or you may be working as a consultant. If you’re issued a 1099-MISC tax form, you’re considered self-employed. If you own your own business, regardless of whether you issue yourself a W2, 1099 or no tax form, the full amount of the payroll tax ultimately comes out of your pocket.

Because of the additional tax burden on the self-employed, aim to increase your income by $250.

  • How would you feel about earning money from one of your hobbies? If you enjoy photography and have proven yourself to be more skilled than the thousands of kids who use their mobile phones as cameras, use automated effects filters, and share their “art” on Facebook, consider doing a family portrait session each month.
  • In the frenetic race to create ever-increasing content online, writers are in demand. Consider offering your skills as a freelance writer for one of a vast number of websites willing to hire good copywriters.
  • If you are not legally restricted, take what you do for a living and offer it to others for a fee. If you’re an in-house accountant, offer to handle your friends’ tax returns. That’s seasonal work, but it could provide enough self-employment income to cover the payroll tax increase for the entire year. If you do office work, find an opportunity to freelance data entry.

I’ve seen that those who begin to focus more on earning income by taking the initiative to make themselves available for freelance or consultant work based on their skills and passions start to see more opportunities. This is more than just earning an additional $250 each month. This could open doors to shaping an entirely new life in terms of income opportunities.

The elimination of the payroll tax cut is just one of those realities, a large-scale economic shift that everyone needs to deal with on an individual basis. We’d like to think we can keep all taxes low forever, but the society in which we would like to live requires funding. Low tax rates won’t remain, and in this case, the payroll tax cut was implemented as temporary from the start, like the Bush-era income tax cuts.

It’s up to the individual to prepare for the changes. When that means less coming home in the form of pay, the changes have to come from spending or income in order to leave saving unaffected. How will you prepare for the elimination of the payroll tax cut?

Photo: Flickr


With hundreds of credit cards available today, it’s difficult to find the best credit card for your particular situation. Whether you need a travel rewards card or a great cash-back card, the best offers are getting more difficult to find. Today’s credit card offers tremendous rewards as credit card issuers make a concerted effort to get your business back.

Credit cards, and in particular the type of credit card use that’s associated with maximizing rewards, are not the best option for people who do not pay the bill in full and on time each month. Be sure to read the note at the bottom of this article before changing your credit card situation.

These are the best credit cards available today, updated for August 2016. I’ve included a brief explanation as to why each credit card made the list. I update this page frequently, so check back often.

Balance Transfers

Chase Slate. Arguably the best credit card offer for balance transfers right now is Chase Slate. Here’s why:

With a Chase Slate balance transfer credit card, you can save with a:

  • $0 introductory balance transfer fee
  • 0% introductory APR for 15 months on purchases and balance transfers
  • $0 annual fee

Plus, receive your monthly FICO® score for free.

Open a card with an offer like this when you have a balance on a card that has a high interest rate that you’d like to pay off without owing additional interest. For example, if you have a $15,000 balance on a card with an ongoing APR of 15%, you could save $2,250 by moving that balance to Slate from Chase and paying the remainder of the $15,000 before the 15-month introductory period ends.

Other cards generally charge a balance transfer fee; but with the Slate from Chase balance transfer credit card, there is a $0 introductory fee on transfers made within 60 days of account-opening. After those 60 days have passed, the balance transfer fee is $5 or 5% of the amount of each transfer, whichever is greater.

It’s always important to read the issuer’s terms, but the 0% introductory APR that applies to purchases and balance transfers would be a good option for buying a larger item. If you’ve saved up to purchase some furniture, for example, you can use an introductory purchase APR of 0% to use the credit card issuer’s money to improve your cash flow — however, this leverage technique is risky. If you end up using the credit card for an emergency, you can make it more difficult to repay your balance before the introductory period is complete. On the other hand, it could leave you with more cash in your bank account.

Honorable Mentions

Here are several other top balance transfer cards:

  • Discover it: 0% for 18 months
  • Citi Simplicity Card: 0% for 21 months
  • Citi® Diamond Preferred® Card: 0% for 21 months
  • Wells Fargo Platinum Visa® Credit Card: 0% for 15 months
  • Chase Freedom Unlimited: 0% for 15 months
  • The Amex EveryDay® Credit Card from American Express: 0% for 12 months
  • Citi® Double Cash Card: 0% 18 months

Compare balance transfer credit cards here

Airline Miles

Most often, the best way to make the most out of your credit card spending for your travel needs is to use the credit card that is tied directly to the airline you travel most frequently. For better or worse, United Airlines flies the routes I generally travel for the best prices, so I use a credit card where I earn rewards in the form of United MileagePlus points. There are cards that are more flexible for travelers who use multiple airlines or don’t have one such frequently-traveled route.

The Chase Sapphire Preferred Card is arguable the best option for earning flexible travel rewards. You will earn one point for every dollar spent on purchases with the card. Your travel expenses as well as your restaurant dining expenses earn double.

Chase is encouraging its cardholders to book travel through their own online agency. When you do, your points are worth 20% more. For example, a $500 flight normally requires 50,000 points. Booking through Chase Ultimate Rewards, however, reduces that requirement to 40,000 points. If you’d rather book directly with your airline, you can transfer your points to leading frequent travel programs on a one-to-one basis.

New cardholders can earn 50,000 bonus points when you spend $4,000 on purchases by the end of the first three months from account opening. That’s enough for $625 in travel rewards when you redeem through Chase Ultimate Rewards, or you can transfer your points to a participating frequent flyer program. Another benefit for travelers is no foreign transaction fee.

There is a downside to owning this card. Chase charges a $95 annual fee. The first year, however, is an introductory annual fee of $0, after that the annual fee is $95. If you make heavy use of travel rewards, it might be worth the $95. If the benefits outweigh the cost, consider applying for the Chase Sapphire Preferred card.

Honorable Mentions

Here are several other top travel rewards cards:

  • Discover it® Miles: Unlimited 1.5x Miles on every dollar you spend on purchases plus double miles the first year.
  • Barclaycard Arrival Plus™ World Elite MasterCard®: 2x miles on all purchases. Earn 40,000 bonus miles after you spend $3,000 on purchases in the first 90 days – that’s enough to redeem for a $400 travel statement credit.
  • Southwest Airlines Rapid Rewards Premier Credit Card: 2 points/$1 spent on Southwest Airlines® purchases and participating Hotel and Car Rental partners (1 point/$1 spent on all other purchases). Earn 50,000 bonus points when you spend $2,000 in purchases in the first 3 months of opening the account.
  • Starwood Preferred Guest® Credit Card from American Express: Get 25,000 bonus Starpoints® after you use your new Card to make $3,000 in purchases within the first 3 months.

Compare travel rewards credit cards here

Sign-up Bonus

Ink Cash® Business Credit Card. Although it’s a card for business owners, I like the bonus Chase is offering. For new cardholders that spend $3,000 on purchases in the first three months of owning the card, the Ink Cash® Business Credit Card offers a $200 cash back bonus.

The card also offers a generous rewards program. In addition to the standard unlimited 1% cash back on purchases, cardholders can earn 5% cash back on the first $25,000 spent in combined purchases with office supply stores and on cellular phone, landline, internet and cable television services each account anniversary year. Equipment purchases aren’t included in that category, unfortunately. Cardholders can also earn 2% cash back on the first $25,000 spent in combined purchases at gas stations and dining at restaurants each account anniversary year. Take note that introductory offers and APRs change often, so be sure to review the application and the terms and conditions carefully when you apply for the Ink Cash® Business Credit Card.

Other cards worth noting

Fidelity Investment Rewards Visa Signature Card. Consistently a reader favorite, the Fidelity Investment Rewards Visa Signature Card offers a unique reward program. Earn 1.5 points for each $1 spent on the first $15,000 in purchases per year, and if you spend more than $15,000 annually that reward is increased to 2 points per $1 in purchases. When you reach 5,000 points they can be converted into deposits into your eligible Fidelity investment account. The card also participates in the WorldPoints program, so if you do not want cash back in your Fidelity account or if you don’t have an investment account, you can redeem for travel on major U.S. airlines with no blackout dates or for purchases from a selection of available merchandise.

Capital One® Venture® Rewards Credit Card. The Capital One® Venture® Rewards Credit Card is as straightforward as it gets, as evidenced by the current offering:

  • Enjoy a one-time bonus of 40,000 miles once you spend $3,000 on purchases within the first 3 months, equal to $400 in travel
  • Earn unlimited 2X miles per dollar on every purchase, every day
  • Fly any airline, stay at any hotel, anytime
  • Travel when you want with no blackout dates

Plus, miles don’t expire and there’s no limit to how many you can earn. The Capital One® Venture® Rewards Credit Card also has:

  • No foreign transaction fees
  • $0 introductory annual fee for the first year; $59 after that

Get more details on this card here.

Note: If you use credit cards as a tool for convenience, pay your bills in full every month, and are otherwise financially self-aware, consider some of these credit cards. If you use credit cards to pay for things you can’t afford, paying interest every month, then start thinking about paying off debt.

The information in this article is believed to be accurate as of the date it was written. Please keep in mind that credit card offers change frequently. Therefore, we can not guarantee the accuracy of the information in this article. Please verify all terms and conditions of any credit card prior to applying. This content is not provided by any company mentioned in this article. Any opinions, analyses, reviews or recommendations expressed here are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any such company. This site may be compensated through American Express Affiliate Program.


Naked With Cash

This article was written by in Naked With Cash. 9 comments.

It’s time to get naked!

Naked With Cash is a series and feature at Consumerism Commentary where selected readers anonymously and publicly track their finances. Each month, the seven participants share their financial reports, exposing the results of their recent, everyday, financial choices. With feedback from a few financial experts, participants in “teams” and other Consumerism Commentary readers will gain from the insight.

Looking for the 2014 series? Read the introduction to the second season of Naked With Cash.

Most importantly, the participants will be exposed to the process of being completely open about their financial situation. Candid discussions about finances and the analysis of the decisions that result in changes to net worth help bring financial independence and other goals closer.

For more information, read this introduction. Continue reading this article to meet the experts and the participants.

Meet the experts

Naked With Cash features four experts, offering commentary and advice on each of the participants’ financial situations.

Neal Frankle

Neal Frankle is an independent Certified Financial Planner™ based in Southern California. He founded Wealth Resources Group in 1994 to provide comprehensive fee-based financial planning exclusively.

His firm specializes in helping clients make smart decisions about their money so they can stop worrying and start enjoying the things that matter most to them.

I know what it’s like to have financial trouble. Both my parents passed away while I was still in high school. I took a tiny insurance settlement to a financial advisor. Rather than help me grow it safely to help me get through college, he churned and burned the account. It was horrible. But this experience made a deep impact on me and helped me really understand what it’s like to be in a tough situation with limited resources and almost no financial understanding. This motivated me to help others by developing a top-rate financial planning firm offering clients a comprehensive range of investment and financial planning services that are customized to clients’ needs.

Neal writes regularly on his blog, Wealth Pilgrim.

Connect with Neal: @nealfrankle on Twitter · LinkedIn · Facebook

Sara Stanich

Sara Stanich is a Certified Financial Planner (CFP®) practitioner and Certified Divorce Financial Analyst (CDFA™) based in New York City. She provides financial planning and investment advice to her clients who include dual-income couples, entrepreneurs and couples going through divorce.

Mom to an energetic preschooler, Sara Stanich has first-hand knowledge of the costs and challenges involved in raising a family. She finds that the responsibilities of parenthood motivate many growing families to deal with issues previously put on the back-burner such as investing, insurance, college savings and estate planning.

Sara Stanich lives in NYC with her husband and son. When not working, she enjoys gardening, being outdoors and spending time with her family.

Sara blogs about financial planning topics at Cultivating Wealth. You can also find out more about working with Sara at Stanich Group.

Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC.

Connect with Sara: @sarastanich on Twitter · LinkedIn

Roger Wohlner

Roger Wohlner, CFP®, is a fee-only financial adviser based in Arlington Heights, Illinois. He provides comprehensive financial advice to individual clients and investment consulting services to retirement plans, foundations, and endowments. Roger’s blog is The Chicago Financial Planner where he provides information about financial planning, investments, and retirement plans.

Roger has been quoted extensively in the financial press including The Wall Street Journal, Investment News, and Reuters. Roger is also a regular contributor to the US News Smarter Investor Blog.

Connect with Roger: @rwohlner on Twitter · LinkedIn

Jacob Wade

Jacob is the author of iHeartBudgets, a personal finance blog dedicated to putting the “Fun” back in “Fundamentals of Finance.” He is a husband, father and avid budget nerd who actually spent his recent birthday budgeting for “FY13” at his home. If you ask anyone who has known him for more than 13 seconds, you would know we truly does “Heart” budgets.

Connect with Jacob: @iHeartBudgets on Twitter · Facebook

Thanks also to Michael Kitces, CFP®.

Meet the participants

[click to continue…]


A few years ago, credit scores were taboo. The idea that a
credit score could be used for more than just determining qualification for a loan was at best unfair and at worst discriminatory. Employers in some circumstances can use credit scores or credit reports to determine whether to offer jobs to applicants. If you sign a credit authorization form, which some employers might imply or outright say is necessary to be considered, the company can use your credit against you.

Auto insurance companies can use credit scores to set your rate because they’ve found that there is a correlation between higher scores and safe driving. If you intend on renting an apartment, the landlord can choose to perform a background check, and credit history could be included. If there are red flags on your report, such as a history of being unable to pay rent, you could be denied the lease.

It’s clear that good credit is becoming more important in life. Credit scores and the quality of your credit histories determines not only the price of major borrowing needs, but whether you can live where you want, whether you can get the job you want, and the cost of required insurance. It’s no longer a mystery that companies evaluate the quality of an individual using their credit, and as a result, any one person might benefit from adding the credit score to their own list of filters for dealing with other people.

It’s getting harder to live a life without a credit score. It’s a noble goal to exist in modern society without taking on any debt and to try to stay off the credit grid. The need for credit permeates life now more than ever. It’s still possible to buy a house with cash, rent an apartment without a credit history, get a job with an employer who doesn’t perform a background check that includes a credit inquiry, or buy insurance without a credit score. But if you haven’t built up a credit history, it’s just another obstacle standing in your way, and can end up costing you more money.

People with poor credit histories, low scores, or no scores might be starting to find it more difficult to find long-lasting love. According to the New York Times, more people are adding credit scores to their social filters, as mentioned above. Credit quality has, in some cases, become the subject of first dates. It’s no surprise that a couple benefits in the long run when both members of the pair have solid approaches towards their finances. Money problems often come to light late in relationships, sometimes when couples are already married and beginning to combine their finances for the first time.

Asking about a credit score on the first date and using the credit score as a proxy for the quality of an attitude towards money and responsibility is one way to prevent reaching the point where the relationship has progressed too far. On one hand, discovering late that your partner does not share your responsible approach to money creates a challenge, that if overcome, could strengthen the relationship.

Then again, disagreements like these often represent a larger issue or disagreement about responsibility that might not easily be overcome. Using the credit score as part of early criteria would help prevent wasted time and effort on a relationship that might never work out. What’s my credit score.

With a responsible approach to handling personal finances, one should be able to expect that a partner has the same. There is room for different philosophies. Someone who identifies himself as a “saver” could have a positive, healthy, long-term relationship with someone who identifies herself as a “spender.” In some situations, one person’s strengths may complement another person weaknesses. If the underlying goals and philosophies are too disparate, it might cause tension and eventually dissolution.

The credit score is just one clue. A good credit score says someone has not made any grave financial missteps, while a bad credit score, by itself, is a little more ambiguous. It could mean someone has a record of bad financial habits. It could mean they’ve missed paying rent. It could mean they have more credit card debt than they can handle. But it could also mean they trusted a family member when co-signing a loan. There’s even the possibility that a family member used and destroyed their credit without their knowledge, and they were unable to work with the credit reporting agencies to change the report.

Your FICO score, or any one of the various numbers published and sold by credit reporting agencies, doesn’t contain any detail. That’s why background checks often contain more than just a credit score. Along those same lines, if you plan on discussing your financial situation with a potential future spouse, you might want to go deeper than the superficial number. It doesn’t make sense to waste time with someone with whom you won’t be compatible, but a credit score alone isn’t going to provide enough information to judge your financial compatibility.

While it might be more common to ask about your date’s financial situation at your first dinner, and I certainly understand why some would not want to waste any time beyond a first date in the search for a match in love, I tend to think it’s best to leave the discussion about finances until a later date, unless the situation calls for it specifically. Personally, I wouldn’t take a first date to a real estate investing sales pitch, but if there’s any time it’s appropriate to ask someone you just met about their credit score, that might be it.

Your credit score is shorthand, and people may judge you incorrectly based on your score, whether it’s low or it’s high. There’s often a story to tell, and while it might be an entertaining story for a first date, you might want to find other areas in which you’re incompatible before releasing a love interest from your life due to his score of 650 compared to your 790.

If you’re the one who feels the need to improve your credit score to make yourself more appealing to the pool of available partners with increasing demands, here are some tips for increasing and improving your credit score. You can check your credit score here.

New York Times


Naked With Cash: Calvin

by Luke Landes

In January, Consumerism Commentary will begin the Naked With Cash event and series. Several Consumerism Commentary readers will share their financial reports and analyses at the beginning of each month, with insight from financial planners and other experts. To introduce each of the participants to readers, I asked them to share where they’ve been, where […]

3 comments Read the full article →

Naked With Cash: SteveDH

by Luke Landes

In January, Consumerism Commentary will begin the Naked With Cash event and series. Several Consumerism Commentary readers will share their financial reports and analyses at the beginning of each month, with insight from financial planners and other experts. To introduce each of the participants to readers, I asked them to share where they’ve been, where […]

3 comments Read the full article →

Naked With Cash: LastDollar

by Luke Landes

In January, Consumerism Commentary will begin the Naked With Cash event and series. Several Consumerism Commentary readers will share their financial reports and analyses at the beginning of each month, with insight from financial planners and other experts. To introduce each of the participants to readers, I asked them to share where they’ve been, where […]

7 comments Read the full article →

Naked With Cash: JW

by Luke Landes

In January, Consumerism Commentary will begin the Naked With Cash event and series. Several Consumerism Commentary readers will share their financial reports and analyses at the beginning of each month, with insight from financial planners and other experts. To introduce each of the participants to readers, I asked them to share where they’ve been, where […]

15 comments Read the full article →

Naked With Cash: Kathleen

by Luke Landes

In January, Consumerism Commentary will begin the Naked With Cash event and series. Several Consumerism Commentary readers will share their financial reports and analyses at the beginning of each month, with insight from financial planners and other experts. To introduce each of the participants to readers, I asked them to share where they’ve been, where […]

8 comments Read the full article →

Naked With Cash: Anonymous S

by Luke Landes
Anonymous S

In January, Consumerism Commentary will begin the Naked With Cash event and series. Several Consumerism Commentary readers will share their financial reports and analyses at the beginning of each month, with insight from financial planners and other experts. To introduce each of the participants to readers, I asked them to share where they’ve been, where […]

4 comments Read the full article →
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