5 Ways to Get Ahead on Your Finances in Preparation of Next Tax Season
The end of the year is creeping up on us, and as we say goodbye to summer, we make way for the holiday season. While you might be tempted to spend all of your “financial thinking” on gifts, travel and holiday fun, take a moment to consider all of the financial loose ends you might have accrued over the past year.
However far off it may seem right now, in order to start the New Year off right there are 5 simple things you can start doing TODAY. If you pay attention to these now, in January you’ll have taken advantage of every savings opportunity available to you and your loose ends will be all tied up.
1. Use your flexible or healthcare spending account savings.
If your employer offers health coverage through either a flexible spending account or health savings account, part of your paycheck has been going towards childcare or healthcare costs all year long.
This is a great set up because it allows you to use your money on ANY medical procedure, and to visit the doctor of your choice – choices that typical health plans put limitations on. The money is also non-taxable. Most of these accounts are of the “use it or lose it” variety—meaning that if you choose not to spend the money in the account by year’s end, it’s gone.
To avoid wasting any money, check with your HR department to see how much you have left in your account, what expenses are allowed under your plan, and then figure out how you can use those funds before the end of the year.
2. Contribute to your retirement savings plan.
If you’re contributing to a 401(k) plan, check with your HR department to see how much you’ve contributed thus far. If you haven’t reached your maximum, ask if you can make a one-time contribution, or, if that’s not possible, if you can increase your per-pay-check contribution by 1% until the end of the year.
3. Bank your bonuses.
Like tax returns, many people use their year-end bonuses on vacations, a new wardrobe or that fancy gadget or accessory they’ve had their eye on for months. They don’t think to use the extra cash to get ahead and become more financially secure. Instead of blowing the money, you could pay off credit card debt or personal loans, pay off outstanding taxes, put money in a college fund for your children, put more money into savings or even invest that money for your future. Whatever you decide to do, you’ll be glad you put some thought into it and chose not to spend it on one impulsive buy.
4. Make a tax-deductible charitable gift.
Charitable gifts can make terrific itemized deductions. If you have extra stuff lying around the house, donate it! Or, if you have an extra lump sum in your bank account, give it to your favorite charity. Not only are you doing something nice, but you’re lowering your taxable income at the same time!
5. Get a jump-start on your New Year’s resolution.
Were you planning to make next year the year you achieved financial stability? Why put it off any longer? Commit to improving your finances today by identifying one thing you can begin doing now and start doing it. If you’re not sure where to start, just pinpoint one financial aspect you’re not comfortable with and concentrate on that. Need ideas? Here are a few:
· Balance your checkbook
· Make – and stick to – a budget
· Find a financial advisor
· Talk with your HR department about what your benefits are and see if you could make changes to your current plan. Sometimes altering your plan can save you big bucks in the future.
What Does This Have to Do With My Taxes?
As we progress in our careers, our paychecks often become larger and tax refunds become a thing of the past. More and more of us find that we have to pay taxes at the end of the year.
Next year, avoid having to get on an installment plan, or worrying about the IRS coming after you, and plan on paying as much as you can on April 15th. If you know you’re going to owe taxes, plan on using your year-end bonus towards that end. By following advice numbers two and four, you can lower the amount you owe exponentially – if you’re smart about it.
Getting hit with back-taxes can really hurt your financial self-esteem. However, changing just one thing – or taking one small step – can boost your financial self-confidence and set you on a solid path toward a more secure financial future.
If you’re still struggling to pay off your taxes from previous years, and if you want to be free from the IRS next year, contact us today at 877-254-4254 to see how we can help you get your tax affairs in order today!