Ask Dr. Per Cap

Ask Dr. Per Cap is a program funded by First Nations Development Institute with assistance from the FINRA Investor Education Foundation. Nimiipuu Community Development is happy to share this column as partner with Native Financial Learning Network funded by Northwest Area Foundation.

Payroll Tax Deferral

Dear Dr. Per Cap:

I’m a federal employee (Indian Health Service) and just found out the government is changing the way payroll taxes are withheld.  How will this effect my paycheck?

Signed, Health and Wealth Minded

Dear Health and Wealth

The payroll adjustment is a temporary tax deferral resulting from a presidential order.  Its purpose is to help folks who might be struggling financially due to the pandemic.  The order allows employers to temporarily defer social security tax from employee paychecks.  The important word here is “defer”.  That means the tax still has to be paid just delayed until January of next year.  At that time deferred taxes will be added back to paychecks in installments through April.

Federal employees and active duty military are already seeing their social security tax automatically deferred so the program is not voluntary.  The deferral is also available to private, state, and tribal employers although not many non-federal employers are opting in.

That’s probably because there hasn’t been a lot of detail regarding how the deferral payback will work.  Moreover, while a bigger paycheck today might be helpful, it just delays the inevitable and a smaller paycheck beginning next year.  Interestingly, the president has stated he will forgive the deferred taxes, meaning employees won’t have to repay them, if he wins another term in November but obviously that’s a crapshoot and forgiveness will still require congressional approval.

The deferral is also only available to employees who earn less than $4,000 bi-weekly.  In most cases that applies to a federal employee who is a GS-13, step 5 and below.  Now let’s look at the math to see how the social security tax deferral impacts a paycheck. 

Let’s say you earn a biweekly salary of $2,200 or $56,000 a year.  The social security tax a person must pay on that income amounts to 6.2%.  Therefore a typical paycheck will have $136.40 of social security tax withheld ($2,200 x .062).  Because there are eight pay periods from when the deferral began in mid-September through the end of the year, a person earning $2,200 each pay period will see a temporary bump in pay totaling $1,091.  Not a giant windfall but enough to pay some bills or go Christmas shopping.  However, don’t get carried away because the deferred tax will probably need to be paid back beginning in a few months. Also remember the deferral only applies to social security tax.  It doesn’t defer other types of withholding on a typical paycheck such as 1.45% for Medicare, federal and state income tax, health insurance premiums, 401-k contributions, or garnishments.  I think Albert Einstein had it right when he said “The hardest thing to understand in the world is the income tax.”

Sage Advice

Dear Dr. Per Cap:

I just graduated high school and will turn eighteen in a few weeks.  What’s your advice for a young person who wants to get ahead financially?

Signed, Looking Ahead

Dear Looking Ahead

Congratulations on your high school diploma!

What I’m going to tell is just as true when I graduated high school back in the eighties as it is today.  And it’s about more than just managing your money wisely.

Over the years I’ve had the privilege of working with a lot of folks, Native and non-Native alike, who were struggling financially – poor credit, difficulty keeping up with bills, minimal savings, etc.   And I can say that there is almost always at least one of three missteps or pitfalls early in life at the root of their financial challenges.

The first is an unplanned pregnancy at an early age – female or male it doesn’t matter.  When a young person who hasn’t yet established a career or livelihood becomes a parent it’s very difficult to get ahead financially.  The enormous cost of caring for a child as well as the emotional toll of parenting cannot be overstated.  I’m not saying it’s impossible to be a good young parent while building a strong financial foundation but it’s really rare.  So take precautions like my uncle used to tell me every time he handed me the keys to his Silverado for a night out.  Yeah, you know what that means.

The next misstep is getting hooked on drugs or alcohol.  This is another huge tax on a young life that can take years to overcome if ever.  It seems like money problems and a chemical dependency habit go hand in hand.  In large part because a party lifestyle is a breeding ground for bad habits that will crash a bank account quicker than an brush fire with a tail wind.

Last is heavy debt.  Car loans, credit cards, student loans – even if the borrowed money is going toward a good cause like a person’s education.  It’s just too easy to get wrapped up in a vicious cycle of debt.  And I know so many people in their thirties and forties who are still paying for junk they bought on credit in their early twenties.

Avoiding these three pitfalls will put you so far ahead in the game of life.  I realize for many people this might be much easier said than done but I won’t sugar coat a dose of tough love.  Personal responsibility is the first and perhaps most important step toward building a healthy financial future.  See you in the short line!

Break the Funk

 Dear Dr. Per Cap: 

I’ve been having a hard time focusing on my financial goals lately.  I just can’t seem to stay motivated to save for a down payment on a house.  My kids are really looking forward to having a place of their own too.  How can I break this funk?

Signed, Loosing Focus

Dear Loosing Focus

I can totally relate.  I think many of us are struggling to stay on point during these troubling times.  Much of what you’re feeling is stress.  Fortunately mental health experts have developed techniques and strategies for how to manage it.

For starters it’s possible you’re feeling overwhelmed because of challenges you’re facing right now.  So grab two sheets of paper and make two lists.  On the first sheet write down things that bother you that are beyond your control such as economic turmoil, remote schooling for the kiddos, or unforeseen health risks.

Next make another list of things you can control.  Your list might include activities you do with family, exercising, eating healthy, and social distancing.

Now take the first list, tear it in half, and throw it in the trash.  You can’t control the things on that list so don’t stress thinking about them.  Then take the second list and post it somewhere where you will be reminded of it daily – the refrigerator door, bathroom mirror, or better yet snap a photo of it with your phone and use it as a home screen.

Hopefully this will help you focus on manageable issues and maintain self-control.  Self-control is extremely important right now especially with so many of our daily routines with work and family turned upside down.  I speak from personal experience when I say sometimes it’s actually harder to get stuff done when we have too much time on our hands than not enough.  I know it sounds crazy but it is true – says the guy who has only worn flops for the past  six months.  Just kidding, well kind of.

Here’s another technique.  Pretend you have a crystal ball and can peer into the future.  While doing so imagine seeing yourself financially secure and living comfortably in your new home.  Picture your family next to you and the health and happiness you all deserve.  Think about upcoming birthdays and other fun gatherings.  Visualize the life you want to have.

Finally identify the obstacles or roadblocks that can prevent that life.  This will help you realize that you can achieve your goals but only if you focus and maintain self-control.  You won’t get there by worrying endlessly about the future, staying up late watching eighties music videos on YouTube, or making poor financial decisions.  Ok, eighties music on YouTube isn’t a total waste of time, but watch out for what we like to call time bandits.  They’ll bleed you dry – even worse than a power ballad by Poison.

Good luck and be strong.  I’m pulling for you!

Paper Towel Worries

Dear Dr. Per Cap:

Do you think it’s smart to stock up on paper towels and toilet tissue in case we have another shortage like when Covid-19 hit this spring?

Signed, Thinking Ahead

Dear Thinking,

That depends on if we see a second wave of coronavirus this fall and how serious it gets. But first let’s talk about what caused the shortages that cleared the bulky paper product aisle at Walmart faster than the family restroom after grandpa takes a double dose of Ex-Lax. Moreover, why
are so many stores still understocked, unable to catch up after last spring’s paper towel shortages?

It starts with how most businesses operate today using a strategy called “just-in-time inventory” which allows them to produce or stock only enough goods to sell quickly. Rather than producing and storing surplus goods for future sales, just-in-time inventory allows businesses to run lean thus saving money and increasing profits. However, there’s a downside to this approach that gave us a rude awakening earlier this year when stores ordered between five and ten times their normal weekly amount of paper
towels. During an emergency when people stockpile there are shortages.
The good news is that toilet tissue supplies are pretty much back to normal so you can probably ease up on your quest to find a modern alternative to that old Sears catalog grandma kept in the outhouse.

Ughh…I’m showing my age. However, paper towels are still running low with people cleaning more during these health and safety conscious times.
Unfortunately, fixing the shortage isn’t as easy as telling paper towel companies, like Proctor and Gamble, to crank up production. Just-in-time means factories today aren’t even designed to produce and package surplus goods. Factor in distribution centers that are quickly overrun plus stores with small loading docks that can’t fit extra truck deliveries, and we’re talking about an entire supply chain overwhelmed. Alleviating these challenges requires manufacturers and stores to radically redesign
equipment and infrastructure along with longstanding ideas about how to run businesses.

So get used to living with limited supplies of paper towels on store shelves for a while. And if coronavirus comes roaring back I think we’ll see a repeat of last spring. But let me pose a crazy question. Do we really need disposable paper towels in the first place? Back in the day we all got along just fine with dish clothes, sponges, mops and other non-disposable cleaning products. Yeah, yeah I know the Sears catalog wasn’t non-disposable but you know what I mean. In the grand scheme having enough paper towel should be one less issue to stress over.

When in Doubt, Save

 Dear Dr. Per Cap:

We’re about six months into the coronavirus pandemic and times are still tough.  I’ve been furloughed from the casino and unemployment insurance only goes so far.  Any idea when the economy is going to come back?

Signed, Doubling Down

Dear Doubling

I’ll give it to you straight.  I think we’re in for a long haul with the coronavirus, at least through the end of 2020; especially in parts of Indian Country where communities have been hit hard by the pandemic.

A huge factor in how well the economy holds up depends on how quickly we’ll have a vaccine for COVID-19.  Some experts warn it could take at least a year while others are more optimistic.  At this point it’s probably anybody’s guess but fortunately we have some of the brightest minds from all over the world working round the clock on the challenge.

In the meantime folks who have been laid off or furloughed definitely need to keep hunkering down financially.  Avoid large purchases if possible, pricey vacations, and other luxuries.  I realize you might not have much choice.  Every pow wow and Native summer event I know of has been canceled and many popular vacation destinations are either closed or only open to a limited number of visitors.  I’ve always sworn by the saying “When in doubt, save your money.”   I think that holds true now more than ever.

Obviously we’ve never lived through something like COVID-19 before but let’s also not forget that many of our grandparents and great grandparents did.  We all know how small pox ravaged our ancestors but we don’t even need to go that far back.  I recently asked my aunt, who is in her eighties, if she remembered her parents ever talking about the Spanish Flu of 1918.  She told me a couple of heart wrenching stories of what life was like at the pueblos during that awful time.  We can draw strength from what those old folks had to overcome so we could be here today.

Let’s also remember to pace ourselves – financially as well as emotionally.  Back in March when the lock downs started there was a ton of information going out with resources for coping; how to access benefits, where to get tested, what to do if you’re feeling lonely or depressed, etc.  But since then I feel like there isn’t as much focus on support.  This concerns me because I think we need encouragement now more than ever.  Were almost six months in and still have a ways to go.  Like most challenges in life, this is a marathon not a sprint.  Stay well.

Ask Dr. Per Cap is a program funded by First Nations Development Institute with assistance from the FINRA Investor Education Foundation. For more information, visit To send a question to Dr. Per Cap, email