As part of the fiscal cliff deal passed this week, legislators chose not to extend a 2 percent personal payroll tax holiday that has been in effect for two years. That means about three-quarters of American households will have smaller paychecks this year, according to the American Institute of Certified Public Accountants.
Someone who makes $50,000 will take home about $1,000 less in pay, the organization said. The fiscal cliff legislation also removed some restrictions that will make it possible for people to convert a traditional 401(k) to a Roth 401(k).
“We’ve moved from a fiscal cliff to a financial reset,” said Sharon Lechter, CPA, author and editor of a new book –Save Wisely, Spend Happily—published by the American Institute of CPAs. “We all need to assess our financial situations and determine what changes we need to make in saving and spending to adjust to the new realities created by this legislation.”
For most Americans, such financial focus hasn’t been a priority. According to a recent poll conducted by Harris Interactive for the AICPA, only 36 percent of U.S. adults planned to set a personal financial goal for the New Year. And about half of them likely will fall short. In the past five years, 43 percent of those who made a personal finance-related New Year’s resolution failed to achieve it or failed to sustain their success. Also, 61 percent of U.S. adults either have no budget or only have an informal one they track in their heads.
The book recommends the following financial tips:
- Review your expenses. With a cut in take home pay, you need to ensure you’re making every dollar count – and that it counts toward goals you want to achieve.
- Have the money talk. Talk with your spouse or partner to ensure you’re aligned in your views about money, which can be the root of significant challenges in relationships. You need to make sure that you’re heading toward similar goals or at least understand the goals you each prioritize.
- Ask for help. If you don’t know how to move forward, ask. According to the Harris survey, only 13 percent of Americans seek advice from a financial professional. Managing money can have many complexities and sometimes a professional can best put you on the right path.
The American Institute of Certified Public Accountants (AICPA) is the world’s largest member association representing the accounting profession, with nearly 386,000 members in 128 countries and a 125-year heritage of serving the public interest.