Outsmarting FICA

In a world where the vast majority of millionaires are made just pennies and dollars at a time, controlling and managing your money is paramount to establishing financial freedom. Understanding FICA inside and out is important to those that are financially driven. As you probably know FICA refers to the social security and medicare taxes that the government collects from each paycheck. Millions of Americans are overpaying these FICA taxes each year. Although it remains true that you will receive a refund on these overpayments when you file your tax returns there remains an opportunity cost associated with these overpayments. By definition an opportunity cost is the cost of the most valuable foregone alternative.

In this FICA tax scenario let’s suppose you overpay by $300. Eventually you will be refunded this money but for a period of time the government has your $300 in its possession. Since this money is in the possession of the government they are able to make interest on your hard earned money. The cost you incur by overpaying the government is the amount of interest you could have made on this money in the given time period. Though the interest that could be earned on $300 in a short period of time is nominal at best, it is the principle that holds the most importance. Those that enjoy financial well-being maintain control of their own money and put it to effective utilization.

Allowing the government to collect more than its fair share of FICA taxes on your paycheck is not an effective use of your own money. There are at least a hundred better alternatives to using your money than overpaying the government on FICA taxes and letting this excess sit in their coffers until you file your tax returns. Here are just few ways to make better use of your own money and perhaps help you become a millionaire.

Top 3 Alternatives to Overpaying FICA Taxes

1. Hide the Money – Put the money under your mattress. At a bare minimum having free access to your own money is 10 times better than anxiously awaiting your tax return so you can have what is rightfully yours. If you are going to give up access to your money for a period of time you should expect something in return.

2. Save the Money – By save we mean put the money in a savings account in the bank so you are at least earning a low interest yield on your idle money. In addition to this small interest yield, a savings account allows you free and easy access to your money.

3. Invest the Money - If you don’t require easy access to your money and you want to begin a monthly investment plan consider investing in mutual funds. There are many plans that will allow you to invest just a few dollars a month and offer higher yields than any savings account.

To learn more about FICA and what forms of income are subject to this tax feel free to visit TurboTax.com, which offers a wealth of insight and information regarding income subject to FICA. And remember to use your money wisely as you establish your financial freedom.

Adam Smith is an informational author for 10X Marketing. You can learn more about other legal issues, like how depreciation is calculated or what an eviction is by visiting the OneMinuteMillionaire.com site.