Social security is there to give some level of security or protection to workers and their families from unforeseen problems such as the loss of a job or disability by providing some form of compensation, usually monetary. In the US it was started in 1935 and has been around ever since. Where putting your personal finance affair in order you should keep in mind your employment records and your social security benefits which are based on that record.

Understanding Social Security

The minute that you start working, you will be given your Social Security Number. You start to pay off taxes with this number. Generally, the taxes are withholding taxes. Meaning, your employer typically withholds them and remits them to the government. If you are self-employed, you have the responsibility to secure your Social Security Number and pay off your taxes. You may be exempt from paying taxes if you are a citizen of a country that grants exemption to US citizens living in the same; and your country has a recognized treaty with the United States.

How much are you taxed?

As an employee, you would be charged with 7.65% interest rate. This covers both your Social Security taxes or your Federal Insurance Contribution Act or FICA and your Medicare. 6.20% of that rate goes to your Social Security tax and 1.45% covers your Medicare. If you are an employer, you would be required to pay an additional 7.65% to match your employee’s contribution.

You will start receiving your benefits from your Social Security contribution when you reach the age of 62 under the condition that you have completed Social Security credits of at least 40 points. Your spouse or your dependent children can also receive monthly retirement benefits from your Social Security regardless of whether you qualify for the retirement or disability benefits or not.

Nowadays, personal finance planning is quite important. One of the things that you can do in order to protect yourself and your family is to save money. Save! Most people are satisfied with living paycheck to paycheck. Some people do not have the money to save while some do not have the motivation to save. Regardless of the reasons why you think you can’t save any money, the fact remains that it is important that you save money.Perhaps, it is a wise idea that you examine your life’s goals especially those that concern your personal finance goals. There will come a time when you will need to retire. Have you even started saving for your retirement? Do you plan to send your children to college? Have you started saving for their college fund?

Why should you save money?

There are a lot of reasons why you should save money for your future. First off, you need to prepare for contingencies and emergencies. Things could happen – death, sickness or accidents. You need to be prepared for anything that life throws your way. If you have emergency savings, you effectively cushioned yourself from financial suicide.Another reason for saving money is to prepare for your objectives. For instance, you wish to send your daughter to college. You might consider saving the money to send her to the best University that you can afford. You wish to buy a new house. Perhaps, you can start saving enough money for your deposit. No matter what you wish to achieve in life, if it involves money, it is a wise idea that you start saving for it.

Another good reason to save money is to have money to invest in any type of asset that can make you money in the long run such as houses, stocks and bonds.