10 Ways to Fight Back Your $1,000 Payroll Tax Hike

With the payroll tax deduction expiring, consider these financial remedies to make the pain on your wallet a little more bearable.

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Feel like your paycheck is getting smaller? You’re not imagining it: The two-year reduction that decreased the payroll taxes you pay from 6.2% to 4.2% of your salary were allowed to expire at the beginning of the year, which means that a family with a household income of $50,000 will now have about $1,000 less to spend this year.

A thousand bucks is serious money, but losing that take-home pay doesn’t have to be as scary as it sounds. On a month-by-month basis, your income will drop by $83 and change. With a little creativity, you can shave that much from your budget each month without a great deal of sacrifice.

We’re assuming you already know that skipping the $4 daily latte habit or canceling cable can get you there. Here are a handful of other ways to make up the shortfall, courtesy of a group of personal finance experts we surveyed.

(MORE: Lots of Special Interest Goodies Were Stuffed into the Fiscal Cliff Deal)

1. Hit the dollar store. Self-described “Dollar Store Diva” Marlene Alexander did an experiment where she logged everything she bought at the dollar store over the course of a week and compared what those items would cost at a big-box store. Her savings: $22.40. “Over the course of a year, those weekly savings alone would add up to $1,164.80,” she writes. Needless to say, perhaps, this means restricting yourself only to items you would have purchased, for more, elsewhere.

2. Drive 25% less. A family that goes through 90 gallons of gas a month (that comes out to roughly 1,000 miles per car, assuming two cars per family) last year spent an average of $324 every month, according to Oil Price Information Service. If you can swap out one quarter of those trips behind the wheel with walking, carpooling, or bicycling, you’ll be $81 a month richer.

3. Shop smarter. “A household with a $50,000 income will spend between $7,500 and $10,000 on food throughout the year,” says Gary Foreman, founder of The Dollar Stretcher. He says you can shave 10% to 15% off this total with a pricebook, which is either a spreadsheet or just a series of notebook pages you divide into columns with a ruler. In the boxes, you record the cheapest unit price paid for groceries, where and when you bought them. Keeping a record lets you see at a glance what the best price is, and where and when you’re likely to snag the best deals.

(MORE: Why More Americans Will Fall Behind on Credit Card Bills This Year)

4. Cut out interest. If you switch $7,000 from a credit card or cards on which you’re paying 15% interest to a card that offers 0% on balance transfers, you’ll save between $87.50 and $76.19 in interest each month over the course of the year. Look for a card with a 0% introductory period of 12 to 18 months so you can either pay off or significantly reduce your debt in that time period — and resist the temptation to run the balance on the old card back up.

5. Wait until next year to upgrade your electronics. According to the Consumer Electronics Association, the average family spent $961 on electronics last year, thanks to our seemingly insatiable appetite for smartphones, tablets, HDTVs, and other gadgets. If you have a true emergency — say, if your phone falls in the bathtub — buy refurbished, which can save you 50% or more off the price of new electronics.

6. Get to work. “Take on a small side job, like walking a neighbor’s dog,” suggests Julia Scott, who blogs at BargainBabe.com. Hit a free site like Craigslist.org to look for gigs or advertise your services, or put the word out on your social networks that you’re looking for a little extra income.

7. Skip the bar. Ashley English, author and blogger at Small Measure, suggests that people who like to hit their local watering holes with friends have a “drink staycation.” Going out once a week and paying for two rounds of drinks can add up to $20 or more, she points out, so cut out that happy hour or after-dinner gathering. A group of friends can rotate hosting to cut costs and still go out for a good time .

(MORE: Cliff Dweller)

8. Quit smoking. Half a pack a day is costing you $79.65, according to Smokefree.gov. And that’s if you’re paying the national average of $5.31 a pack. If smokes cost more in your state, you’ll save more by quitting.

9. Stop using storage units. The National Foundation for Credit Counseling suggests ending the practice of forking over good money to store all the junk you don’t use anymore. “It’s a double-play to sell the contents… money in the pocket from the sale, and no more rent payments,” the NFCC says. Eliminating the rent payment alone could save you $80 or $100 or even more each month. Better yet, sell some of that stuff you don’t use online and get ahead on next month’s saving.

10. Brown-bag it. “Bring your leftovers to work for lunch,” says Katy Wolk-Stanley, who blogs as The Non-Consumer Advocate. Even if you and your spouse stick to $5 sandwiches or combo meals, swapping those out for last night’s chili or lasagna twice a week will save your family $20 a week.

10 comments
MattMartin
MattMartin

"The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money."
--Alexis de Tocqueville

padib
padib

In an odd way this is fighting back against the government considering how much of our government is owned by big business. Also consider moving your accounts from big banking institutions to local credit unions. Vote the issues and not party lines.

don_myrick
don_myrick like.author.displayName 1 Like

This is an attempt to make you accede to inflationary price increases and higher taxes by cutting back. Fighting back is getting in the face of your congressman. Government action causes recession, inflation, and unemployment. It can also stimulate the economy by cutting back on government spending and lowering taxes. Fight back by calling your congressman and telling him to do like the rest of us, and tighten HIS belt.

noneedtoaggress
noneedtoaggress

I don't  understand how this is "fighting back"?

So is buying a bus pass also considered "fighting back" against a neighborhood gang who expropriates your car from you for living in "their turf"?

If that's "fighting back" then what does it mean to "submit"?

steveriker
steveriker like.author.displayName like.author.displayName 2 Like

Nowhere in Time Magazine's brilliant analysis did I see a suggestion to elect politicians who would cut their own spending. Then you could do what you wanted to with your own $ 1,000.

GreggEdwards
GreggEdwards like.author.displayName like.author.displayName like.author.displayName 3 Like

The writer of this great article forgot to say to the hard working middle class why don't you just give up living and your life so government can get bigger.  Hey if you cut out all meals all together look at the money you can save!

pushypants1
pushypants1 like.author.displayName like.author.displayName like.author.displayName 3 Like

This article is divorced from reality.  I hate to tell you but the working poor do not have a $4/day latte habit like the writer can apparently boast.  And even if they did, why are they being forced to cut back when bankers got million dollar bonuses.  maybe they should break their lying and crooked ways habits. #ImpeachObama

bryanfred1
bryanfred1

This list skips the biggest one - make food at home instead of eating out or ordering to-go.  Do that once a week and cover most of the $80 per month reduction.

oq172
oq172 like.author.displayName like.author.displayName like.author.displayName like.author.displayName like.author.displayName 5 Like

I find it interesting that this article is telling hardworking people how to do more with less.  Maybe this article should be written for and sent to our governement officials.

pdxmom
pdxmom

@oq172 right - why aren't *they* cutting back????