by Tara Puckey
The start of a new year often marks a time when we stop and take stock of our financial situation and make any needed adjustments. From making a budget to planning ahead for the annual tax day, make sure you and your money start 2017 off right!
Budget Ready for 2017
Struggling to meet your budget every month? Too many bills left at the end of your check? Don’t even know where to start? Budgeting is hard, and working out a system that is easy and uncomplicated takes time. Start off 2017 on the right financial foot by getting organized and having a workable budget in place before the start of a new year.
Divide and Conquer
Decide what categories you plan to budget with. A simple Google search can help with some ideas, but only you can know what works best. Beware of adding too many — you don’t want to get stuck trying to remember where each expense fits. On the other hand, having broad categories sometimes makes it hard to isolate and identify your spending habits.
Evaluate Your Spending History
If your bank offers sorting by category, you’re already ahead of the game. Using these reports, figure out what expenses you’ve had, on average, in each category over the past year. Be sure to double-check the charges to make sure categories are accurate. If you don’t have the option to sort by category, print or download monthly statements and use different colored highlighters (physical or digital) to align each charge with a specific category.
Balance the Spending
Once you’ve averaged out spending amounts for each category, examine each one closely to figure out if it’s realistic for you and your family. Look at outliers — anytime you spent significantly over or under the average — and determine the cause. It might be more frequent than you had assumed. Adjust the category averages accordingly until you’re happy with the allotted amounts.
Calculate Your Income
Make a list of any income you’ve received over the past year. Salaries are easily predictable and are on a schedule, so figuring monthly income from those is easy. Small business owners or independent contractors or consultants might have a harder time coming up with a set income amount each month. If you’re all over the board, find an average that you’re comfortable with.
Spend it All
Using your monthly income, allocate it to each of your budget categories. Did you have enough? End up with too much (which isn’t a bad problem to have, after all)? At this point, you’ll be able to adjust spending to cover each category. This is the step where you should evaluate the need for your spending.
Do you need to hit the local coffee shop so much? Is it a need to dine out two or three times per week? Adjust allotted amounts in each budget category until you’ve covered all your expenses. If you have some left, decide where it will go (HINT: investments, savings and paying down credit card or other debts are the best options).
Make a Plan
Finally, it’s important to set rules on how you’ll follow and manage it. One idea is to use an app or online program that links to your bank account and can give you real-time updates on where your money is going and how far, or close, you are to your budgeted amounts. Another option is to work it all on paper by setting aside a time to balance your checkbook and budget each week.
This might be helpful if you’re working on the budget with a spouse or partner as creating an environment to talk about successes and challenges can help keep you accountable in your financial planning.
Plan Now for April 15, 2017
Every day that ticks by brings you closer to a new year: new goals, fresh start… taxes. They don’t have to be feared or dreaded. With a little preparation and some serious planning, you can have everything in order before the ball even drops on 2016.
Make Tax Folders
Create a folder for different categories of expenses that affect your taxes. Medical bills, vehicle title receipts, mortgage statements and income paperwork like pay stubs or prior year tax paperwork are a good place to start.
Small business owner? Save all your receipts and keep like items together for easy sorting later. In college or have a child in college? Be sure to keep every receipt or confirmation having to do with tuition, books and room and board.
Don’t Forget Those Charitable Donations
Did you donate to a charitable organization this year? Dig up those receipts! If you can’t find them or aren’t sure, a quick call will help you figure out if you donated, how much and the EIN for the organization, which you’ll need when filing.
Create a Quick Cheat Sheet
Scrambling for important information when you’re right in the middle of filing is never fun. Take some time to put together a simple list of all the info you might need: full names, Social Security numbers, birthdates and previous addresses. Having these things handy will save you tons of time later, even if you’re filing your taxes yourself.
List Those Life Events
A year holds a lot of big moments and they’re sometimes hard to remember in the moment. Along with your cheat sheet, list all the big changes over the last year. Did you have a baby? Sell your house? Inherit money from a loved one? As you jot it down, take time to dig up any associated paperwork like sales paperwork from your realtor, hospital bills from the birth or inheritance documents provided by an attorney or bank.
Decide Who Will File Your Taxes
Educate yourself about your options when it comes to actually filing your taxes. If you’re single with very few expenses, filing yourself is likely the cheapest and most efficient option. Married couples who own a small business, for example, would probably have more deductions and might benefit from having a professional file their yearly taxes.
No matter your choices, explore all the options and be sure to check with your bank (especially if you bank with USAA or another military-focused institution) to see if they offer discounts with online filing companies.
Find Your Return From Last Year
Having information about filing your taxes the prior year is helpful to make sure you’re not missing any major expense or income items. In addition, if you’re filing online, you’ll likely be asked to confirm items from your previous return to confirm your identity and complete the online filing process for the current year.
Make Plans for Your Refund (or Payment)
Before you get those refund figures, decide what your priorities are. Catching up on debt? Investing Explore all your options, including paying into several investment opportunities like IRAs. If you have a plan, you’re more likely to stick to it regardless of the amount you’ll see as a refund. And, it doesn’t hurt to have a plan for how you’d pay the tax bill if you end up owing.
If you do owe money, take a look at your withholdings and adjust as necessary for next year — ideally, you should neither owe to nor receive money back from the IRS each year.
—Tara Puckey is a military spouse and freelance writer who lives in Indiana