Don’t Feed the Alligators

Recently my wife’s boss proposed the following: If she could give up health benefits she would receive a 17% raise. Until now, our family had been receiving all of its health benefits through my wife’s employer. My employer, however, offers health insurance as well. So the math is pretty simply here: Do the health benefits through my job cost more or less than 17% of my wife’s salary?

The astute reader, however, will recognize that this equation is not so simple. The health insurance premium is quoted in a before-tax amount, which means the actual difference in my paycheck would be somewhat less than the premium amount. Additionally, my wife’s raise would mean that more taxes would have to be paid on her earnings. To figure out what the difference would be, exactly, I popped over to the NetPay calculator at Paycheckcity.com

To use this calculator, you choose your state, enter your salary indicating how often you earn the amount you enter, fill in your deductions, and click calculate. In my case I already know the deductions that I’m claiming, and wanted to compare 4 different sets of incomes and deductions. But this tool can also be used when you start a new job and need to figure out what your actual check amounts will be, Additionally, if you over- or under- withheld on your taxes you can figure out how many more exemptions to take or how much extra to withhold. You can also figure out what the impact of increasing your 401k deduction will be.

The result of my calculations shows that my wife, who works half time as a structural engineer (and more than full time as a stay-at-home-mom) for good money, and I will net a whopping $136/month increase in salary. Now $136 is $136, but it’s a little surprising to me that a 17% raise can result in such a small net increase. This increase will go straight into our debt snowball extra payments.

I have used this Salary Paycheck Calculator a number of times and it’s great to have an analytical tool like this to see what the effects of payroll changes can have before you actually make them. So check out the tool and let me know if you find it useful.

Here are some interesting articles that I read this week:

• Lynnae at BeingFrugal.net started a multi-part book review on (Not) Keeping Up with Our Parents by Nan Mooney. Lynnae was upset at the assertion that people don’t have choices, and I agree with her. However, I argued that the middle class is being squeezed by both corporations and the government and that “middle class” members should be able to take their kids to Disney World now and again. Yes, people make bad choices, but all too often these days many people are taken advantage of by greedy companies under the full knowledge of our government. See my review on Maxed Out for more thoughts on this.

• The interview with the author’s of Nudge at the Freakonomics blog was very interesting. It’s amazing what a difference can be made simply but changing the framing of the question or the default choice for such things as organ donation and 401(k) contributions.

• At MyTwoDollars.com guest poster Tisha Kulak discusses the pros and cons of co-signing a credit application for your children (or anyone else for that matter). Most of the comments conclude that one should not co-sign for one’s children. I tend to be less black and white about just about any issue. I suggested that co-signing for a credit application is acceptable as long as it’s not the first lesson your child is getting in money management and responsible use of credit.

• Paidtwice at Paidtwice.com argues that All Funds are Emergency Funds until you have sufficient reserves. We have a fund into which we make monthly payments towards annual bills (insurance, taxes, etc.). This article reminds me that we don’t have to have a whole year worth of payments for each annual payment before paying out of the account. All we really need to have is enough money to cover the biggest bill.

• Madison at MyDollarPlan.com writes about the lessons learned while filing her taxes this year. Madison and I both had issues with Roth IRA conversions this year that required recharacterizing contributions due to ineligible conversions or contributions. The recharacterization was easy, but I’m still struggling with how to fill out the necessary tax forms. I have not yet filed our taxes this year (we’re getting a refund, so we’re not late…). I’d like to thank Madison for her help to me on this sticky issue.

Off topic:

• I enjoyed reading the article by Lenore Skenazy here and the follow-up here, as well as Ms. Skenazy’s NPR Talk of the Nation Interview which featured a great quote: “It’s not like we threw him into the East River…”. Her thoughts about Free Range Kids sure has generated a firestorm of comments. ScrapperMom and I find ourselves on opposite sides of the issue, though we are not radically left and right on it, but rather both closer to the center.