One way to increase the pace of your debt reduction plan is to increase your monthly cash flow. Short of getting a promotion or cutting your expenses (which we assume you are doing), there are a couple of other ways to put more money in your pocket. Below are a few things to consider.

1. Mortgage Refinance

If you are still paying a higher than market rate on your mortgage, then this is really a no brainer. Refinance your mortgage and you could potentially save a few hundred dollars a month. Do not just consider a regular fixed rate conventional mortgage, but also look at fixed to adjustable mortgages. The media will have you believe never to look beyond the conventional fixed rate mortgages, but saving on interest in the early years of a fixed-adjustable mortgage can make the difference between paying off your debt sooner or much later. You can always refinance again later on.

2. Make sure you maximize your tax benefits on your retirement contribution

Many of you have both a company sponsored qualified retirement plan and a perhaps your own IRA. Before you contribute into your IRA, make you max out your contributions to your existing company plan. I know many people who do not max out their qualified plans but contribute to their individual IRAs instead. By not maxing out your contributions to qualified plans, you could be potentially leaving money on the table to the IRS.

For example, if you have a SEP plan and an IRA, you should be maxing out your SEP plan before even thinking about contributing to your IRA. The IRA has certain phase out rules that stops your contribution from tax deductibility. The rules involve both gross income, whether your spouse is an active participant in an employee plan. Know these rules and maximize your contributions to your qualified plan.

3. Putting your kids savings in a 529 Plan

In some states, contributions to 529 plans are tax-deductible for state taxes (not federal taxes). You will have to find out what the rules of your state are. But if you are a resident in one of those states, you could potentially reduce your tax bill quite a bit. In that case, you should get started immediately on a 529 plan. Even if you do not have 529 plans, you can actually start one for yourself! The portfolio in any 529 plans grow tax free. Furthermore, you have full control of the account even if it is for your kids.

4. Invest in Muni Bonds if you are in the top tax bracket

If you are in the top tax bracket, then you have no business being invested in a taxable bond fund. Get rid them and invest in Muni Fund that invest in your states municipal bonds. This is another potential way to save on your taxes and put more money in your pocket.

5. Incorporate Your Home Business

If you have a home business (like running a profitable blog!), then incorporate it rather than just being a ’sole proprietor’. By doing so (in the form of an LLC), you can not only limit your personal liability, but also deduct business expenses, depreciate things like your computer etc.

That’s it for now!

OK, that’s it for now. Please share any other ideas you have for getting more cash in your pocket.

This entry was posted on Friday, May 4th, 2007 at 3:03 am and is filed under Debt Reduction, Personal Finance, Tips and Advice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.