Today is Tax Day. Tomorrow it will be over. Your taxes will be done with and you can sit back and enjoy a clean slate and a fresh start.
Tax time is the perfect opportunity to jumpstart your spring-cleaning by tackling your financial to-do list. Having spent hours digging through your personal file cabinets and preparing the paperwork for today's deadline, you are now intimately aware of your financial situation. Take advantage of this time to tidy up those finances and get in better financial shape for the new tax year.
I submitted my taxes for 2010 and I now plan to tackle my own financial must-do list in order to kick-start the new tax year in good form. Let's take a look:
1.) Organize your financial life. Tired from sifting through unlabeled boxes filled with documents, receipts, and bills during the past tax season? You can save a lot of time and a few gray hairs next year if you start organizing TODAY. Pick a place now where you will save ALL of your important tax paperwork/receipts/ donation forms etc. for 2010 taxes.
2.) Set up online Bill Pay! Forgetting to pay your phone bill because it was under a pile of papers is no excuse in 2010. Online bill reminders make your life very easy. So to start, sign up to receive your statements via email. Getting your bills emailed to you will help keep you 100% on top of them: you will have them all in one place, instantly accessible to you at any time. Next, set-up calendar reminders 2-3 days before of your bills are due. If you fail to pay your bills on time, your credit score will take a major hit. It's that simple.
3.) Get on a budget. That is, a true, detailed budget! Manage your spending by creating and sticking to a budget. I use the LearnVest Budgeting Tool, to figure out how much my life costs (i.e. all that I spend), and how to cut those costs. Living beneath my means doesn't mean ramen and water, either. It does mean spending less than I make. You can visit BillShrink to find ways to save on random expenses and bills, from gas to cell phones to credit cards.
4.) Give a boost to your emergency savings account. Your short-term savings account may have seen a bit of wear and tear this year so make sure it has at least 6-9 months of your living expenses. (Again, use this budgeting tool to figure out what those expenses are!) I suggest automating the process: set up the direct deposit of your paycheck so that a small portion of it is automatically transferred into your savings account the day your paycheck is deposited. Out of sight, out of mind, and you will be that much better off for the unexpected.
5.) Request a free credit report and check your credit score! Your credit score and your credit report are two of the most important financial paperwork that exist on you and your financial history. I check my credit score for free at CreditKarma and set up reminders to check it every three months on my google calendar. You have the power to improve your credit score, so make it your goal to raise your score above 760 moving forward.
Make sure to also take advantage of the three free credit reports you get per year (from Equifax, Experian, and TransUnion). Your credit report should be 100% accurate, so make sure everything is entirely correct. If something doesn't look right, dispute it.
6.) Readjust your tax withholding. If you received or will receive a big tax refund this year and would rather add more to your paycheck for day-to-day expenses, you may want to utilize a tax withholding calculator. The results will only be as accurate as the information you provide, so make sure your recent pay stubs and income tax returns are handy and estimate the necessary values to the best of your ability. Visit the IRS website for information on the IRS Withholding Calculator.
7.) Shop around ... again. It's time to reevaluate your cable package, cell
phone plans and insurance policies. Shopping around for new services should be done yearly in order to ensure that you are getting the best service for the best price. With the economic downturn, companies are offering new deals for their customers. Take advantage and get your money's worth for your services. Negotiate!
8.) Contribute to your 2010 Roth IRA. The time to save for the future is NOW. Thanks to compounding interest, the earlier you start putting money away for the future, the more you will save. Every year, you have until April 15th to contribute to your Roth IRA account. Plan to contribute a certain amount for the 2010 year and distribute that across 12 months. By setting aside a monthly contribution, you will be more likely to pay the amount and stay on course for your yearly contribution.
9.) Plan ahead! Mark March 15th as the latest day for you to get cracking for next year. If you want to use an Accountant next year, make that February 15th so you have time to find a person you trust. Mark April 15th on your calendar as TAX DAY.
**PS. If you haven't filed yet or can't file before the end of today, the worst thing you can do is do nothing. You have options and one is filing for an extension. You can do this by simply filling out IRS Form 4838. Note that an extension of time to file is not an extension of time to pay. For more help, call 1-800-829-1040 or visit www.IRS.gov to find the closest IRS office.**