Made to Order : How do you like your paycheck?

"How would you like your salad, Ma'am?"  Thoughts swept through my head - what I needed, wanted, and what looked so dang tempting that all logic waivered. "I'll have the Asian Chicken Salad, please."  Sensible, salty and sweet, and, well, that peanut dressing is way too good to pass up. "Oh, and can you add some egg whites to that, please?" I ask, trying to add extra protein in exchange for the sweet indulgence of the dressing.  The man across the glass case gave me a minor grimace (or gag, I couldn't really tell).  "And please hold the wonton strips." Even though they were only thirty cents extra, they were a smart exclusion to stick to great tasting nutrition within my price range.  Voila!  I walked away with the perfect salad for my needs, budget, wants, and tastes.

Have you ever thought of your paycheck as something you can customize, like an order at a restaurant?  It may not always feel like it, but every paycheck that heads your way is made to order!  Aside from the inevitable taxes (or the base cost of my salad, for example), each paycheck is prepared to provide what you specify, from pre-tax programs to retirement accounts and even to your pocket for life experiences, wants and needs.

How can you tell if your paycheck is made to order correctly?

If you receive a paycheck with benefits from your employer, many of your "order choices" are made all at once when you first join the company.  These are things like your choice of medical coverage, benefit programs, and so on.  Here is a rundown (or refresher) of the two primary categories of your paycheck:

• Pre-tax options - These are great opportunities to make the most of your salary and receive the benefit of not being taxed for making smart decisions.  Most pre-tax items are things the government deems beneficial, encouraging you to take advantage of such options free of "government charge."
• Post-tax options - This is where a combination of additional deductions, deposits to supplemental accounts and self control come into play ;).  Options for automatic distributions (such as sending a portion of your income to savings accounts or investments) can help allocate your money wisely without any effort.  This is especially beneficial for those tempted to spend or not in the habit of saving.  What money you don't see you often learn to live without while it  grows quietly in the background.

Some of these choices you can only change once a year during open enrollment (or life events), but some can be adjusted at any time.  For example, you can access your 401(k) contribution settings and adjust them throughout the year to be more or less per paycheck.  Once a quarter I check to make sure the allocations I made still make sense for my current and future goals, and I make changes as needed.

What's a "paycheck order" and can I see the menu?

I like to think of my paycheck as having options for four major things - current needs, future needs, future wants and current wants (in that order).  By matching your paycheck order to your "menu" of options in these four ways, you can set yourself up for financially savvy habits and best customize automatic paycheck settings to meet your current and future needs (and wants :)).

Take a look at the "menu" above.  Keep in mind, every employer offers different options/benefits, and that items in the post-tax row are a combination of personal decisions and paycheck deposit options.  Within each column,  review what makes the most sense for your personal needs, financial goals, and current circumstances. Again, I build my paycheck order from left to right (Chipotle style!).  Are your current needs covered?  Do you consider your future needs before diving into your wants?

There are some items that will, of course, have different advantages based on your circumstances.  For example, someone with a very high level of personal debt might consider whether 401(k) contributions are best postponed until their debt is paid off or lowered (check out our article Cash or Credit - Being Savvy About the Real Cost of Credit for the basics on interest rates). If the rent is late or you don't have an emergency cash fund set aside, prioritizing things in the "current wants" column could potentially put yourself at risk of serious financial repercussions.  In an opposite example, someone else may have important investment decisions to make after a significant raise.  If your current needs covered, you have no debt and/or have extra income, make sure your paycheck choices are allocated in a way that helps build a lifestyle you can maintain for the long term (rather than one you can't afford later on in life).

How purchases are made, points are earned, and giving is included in your financial choices shapes your present AND future, no matter what your paycheck looks like.  Classy Not Pricey maintains the pillars of spending wisely (Sales and Deals), earning points and loyalty with diligence (Rewards and Points), using your financial knowledge (Financial Savvy) and considering the impact and value of charitable giving (Giving is Classy).

Ultimately, with a bit of prioritization and the proactive mentality of seeing your paycheck as a made-to-order ticket to your goals, you can (quite literally) have your salad and eat it too.  So, how would YOU like your paycheck today?

Disclaimer:  The information provided in this article is solely the opinion of the author.  It is for informational and educational purposes only and should not be construed as professional financial advice. Should you need such professional advice, consult a licensed financial advisor or tax advisor.  Google