Three Ways Budgeting Our Money Actually Makes Us Richer (Part 1)

#1 We know how much money we actually earn.

If we earn $50,000 a year but don’t create and follow a budget, then all we know is how much money gets deposited into our account. We’re not thinking about our gross pay and our net pay. We’re not paying attention to taxes, insurance, deductions, and any H.S.A. or retirement savings that are being or could be pulled out of our paycheck. In fact, we only really look to groan at how little of our earnings we are actually receiving. 

If we paid a little more to ourselves in our health savings account or our retirement account, we could be paying less in taxes on our remaining earnings. This switch to paying ourselves more using pre-tax money might even pay for itself in after tax savings, giving us close to the same amount of take-home pay. Also, it could be that we are getting a good-sized tax return every year, suggesting we could pay less in taxes every paycheck. It is critical to know both our gross and net pay so both can become part of our working budget. 

Knowledge can be powerful. Once we know how much our gross earnings are, then we can figure out how much our employer is paying on our behalf for insurance and retirement. We can work out the math to make sure we are paying the right amounts to secure any free matches our employer is offering. As an example, if our employer matches our retirement savings up to 6 percent, but we are only paying 2 percent into our retirement savings, we may want to add an additional 4 percent to get the rest of the free money. With our additional 4 percent savings, we go instantly from saving 4 percent to 12 percent of our income. 

Having this knowledge is also critical when it comes to comparing our current jobs against other employment opportunities. Knowing how rich our benefits are and how much our employer contributes towards them offers a clear picture of our entire employment package. This allows us to understand our earning power in different employment scenarios and puts us in the driver's seat.

-Written by: Financially Fit Me Founder Kimberly Greenman-