Don’t Simply File Your W2 – Analyze It!
February 06, 2012When you look in your mailbox these days, there is some kind of a tax form waiting for you just about every day. Most people simply glance at them to verify there are no mistakes but then they go into the current year’s tax file. After filing taxes, who pulls out their W2 and goes over it with a fine toothed comb? Not too many people I would assume. Most of us are so glad to get our taxes filed and over with that we are done and ready to move on to other things.
Think about the information available on your W2 –
First of all, look at the first box: “your income.” Take a long hard look at your income and consider how valuable that income is and what you are doing with it. For an employee that makes $50,000 a year, it’s about a million dollars over a twenty year period. How much of that income are you capturing in savings and investing? What will you have to show for it in twenty years? Also check your trend – is your income stable since the recession or increasing? If increasing, what are your plans for increasing your savings as your income grows so you don’t end up saying, “the more you make, the more you spend.”
Check your retirement plan saving percentage – how much are you putting into your 401(k)? Are you at the maximum? If not, increase your contribution percentage even if it is only 1% because every little bit counts. According to Thomas Stanley, author of The Millionaire Next Door, millionaires saved an average of 20% of their income. How do you compare?
What tax breaks are you taking advantage of? Got kids? Are you using your dependent care plan at work? What about your FSA or HSA? If your company has a plan that you are not taking advantage of, then you are paying 20 – 25% more for your out-of-pocket health care costs.
Who knew a W2 – a form your company is required to fill out – could yield so much information? Take some time to review it and see what it says about your finances.