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5 Tips for Getting Your Finances in Order by the End of the Year

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As 2020 draws to a close, it’s time to make resolutions for the new year. Hoping to pay off debt in 2021? Want to save more for retirement? No matter your financial situation, the new year is a fantastic time to take stock and prioritize your financial goals.

In order to achieve your financial goals next year, it’s time to get your finances in order. Here are five simple tips to help you update your budget, stay on top of your taxes, and enter the new year ready for success.

#1 Update Your Budget

You’ve got a lot of changes to tackle in a year, and that includes your budget! Maybe you have some extra wiggle room, or maybe you need to rethink your spending habits. No matter what, staying on top of your budget is an easy way to keep your finances organized.

  • Budget Every Month – It’s okay if your budget shifts month-to-month. Sit down at the beginning of each month and take into account any extra expenses (or earnings) before you set your monthly budget goals.
  • Track Your Expenses – Keep track of where all your money goes! You’d be surprised how quickly trips to the coffee shop add up. When you know how you’re spending money, you can set your budget to accommodate your needs.
  • Prioritize the Essentials – Start with things like rent, utilities, food, etc. Once you have the basics down, you can see how much you have left for date nights and shopping sprees.

#2 Save For Retirement 

It’s never too early to start saving for retirement! Once you make it a habit, saving for retirement will become second nature. So, let’s make your retirement dream vacation a reality! For those who want an individual retirement account (IRA), check to see which type of IRA is the best fit for you based on your employment status. Understanding your IRA options will help you make a decision that aligns with your financial goals. 

Another great way to save for retirement (if applicable) is to contribute to your 401(k). If your employer offers to match your 401(k) contributions, take advantage of the offer and make sure you contribute enough to gain the full benefits.

#3 Review Your Tax Withholding

It’s wise to review your tax withholding each year. For most taxpayers, your employer withholds some of your paycheck based on the amounts you provided on your W-4. Check your withholding status to see if you need to update your W-4 form or if you need to make an estimated tax payment to the IRS.

Quick Tip: If you’re worried you may be subject to backup withholding, check with the payer to ensure you receive the correct TIN (taxpayer identification number).

#4 Understand Your Debt 

To get your finances on track, it’s essential to review your outstanding debt. After all, when you’re organized financially, paying off your debt won’t feel as daunting.

  • Know How Much You Owe – Take a look at your various debts—e.g., student loans and credit card bills—and make a list of payment amounts and interest rates. This way, you’ll see what your monthly payments look like at a glance.
  • Prioritize Your Payments – Look at your debt and prioritize which loans to pay off first. In general, it’s prudent to tackle loans with high interest rates first, so you don’t end up drowning in payments later on (a.k.a., the snowball method).
  • Consolidate Your Loans – For student loans, in particular, consolidating your loans lets you combine pre-existing loans into a single one at a fixed interest rate. This simplifies payments since all your debt is in one place.

#5 Consider Charitable Giving 

The end of the year is a wonderful time for giving. Part of organizing your finances is setting aside funds to contribute to charitable causes. Look into local charities that are close to your heart to determine the best ways to donate.

In most cases, charitable giving is tax-deductible. Make sure you keep track of your donations so you can itemize gifts on your tax return.

Achieve Your Financial Goals

Getting your finances in order is just the first step to achieving your financial goals. Remember, being realistic about savings, understanding debt payments, and monitoring spending is all part of maintaining a healthy financial lifestyle. Once you have the basics down, you’ll be on track to a prosperous 2021!

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