Americans are happy about the recent tax cut and are using the extra cash to build their finances, a new survey reported.
The average biweekly paycheck increased by $65, amounting to about $130 a month, since the federal tax cut went into effect.
The majority of those taking home more say they were pleasantly surprised by the size of the bigger paychecks, according to the survey, conducted by LendEDU.
“We found that 64 percent of Americans were expecting their take-home pay to increase after the Tax Cuts and Jobs Act was passed in December 2017,” the study said.
Most respondents said they are using the extra dollars toward paying down debt, or are saving and investing more — which means inflation fears should be abated.
“We were delighted because we found that most people are not using the extra money on day-to-day luxuries,” said Nate Matherson, CEO and co-founder of LendEDU.
About 70 percent of respondents said they were very happy or happy about the tax cut, while 23 were indifferent and 6 percent weren’t happy.
The survey also found that the plurality of respondents — 35 percent — said they would use the extra cash to pay down debt.
About two-thirds of that 35 percent said they would reduce their credit card debt.
“This makes a lot of sense,” Matherson said, “because the average interest rate on credit card debt is in the mid-teens, while the average interest rate on student loan or mortgage debt is in the low single digits.”
Most financial planners advising people how to dig out from deep debt say the highest-rate loans, which are the most expensive, should be paid down first.
The survey also found that 31 percent of respondents said they would use the extra money either to bolster their bank account or to put more into retirement accounts.
“Luxury spending” only made up about 10 percent of how respondents intended to spend their tax break, according to the survey.
The majority of respondents also said they were now more confident about their financial futures as well as the future of the economy.
The poll questioned 1,000 adults age 18 and over who said that their take home pay had increased because of the tax cut.
Matherson noted that $130 a month can make a difference.
And, he added, as many young people are starting out building their careers and managing debt, “that $1,600 a year could go a long way for a lot of our readers.”
The Tax Cuts and Jobs Act of 2017 represents the most significant changes in tax law in over 30 years! Don’t pay more in taxes than you’re required. Give us a call today at 636-394-5524 and let us help guide you through the complexities of these new rules.