Although the holiday season is in full swing, this is not the time to ignore your finances. A spending budget for gift-giving and entertainment is never a bad idea, and consider this: The more restraint you exercise this month, the less headaches you'll have in the new year.
There are quite a few quick and easy things you can do that will improve your tax situation and help you start off 2013 on the right foot. Most of these suggestions take very little time, and are well worth the effort.
1. Start Preparing Your Taxes Now
There's no need to wait until your W2 forms arrive in January to begin to prepare your taxes. This is especially true if you itemize deductions. Collect your receipts and billing statements and organize them according to your main categories of deductions, such as unreimbursed medical expenses, charitable donations, and job-related expenses. Take note of your retirement contributions and your college savings investments as well. If you currently do not have an organization system in place for your documents, consider starting one now.
2. Make a Donation
To get a larger deduction on your tax return, consider making a donation before December 31st. Look through your closets and drawers for items you no longer need. Make a list and value them accurately, and then donate them to a qualified charity. You can find a list at the IRS website.
3. Max Out Your Retirement Contributions
During the rush of the holidays, it can be a challenge to max out your retirement contributions. However, it will certainly benefit you in the long run. Make sure you're contributing up to the maximum allowed by the IRS for your IRAs (the limit is $5,000 per year for most individuals), as well as for your 401k program ($17,000 for 2012). Going forward, consider making automatic contributions to your IRAs throughout the year, and increase your contribution percentage on your 401k to lessen this financial impact.
4. Establish a Budget
More than half of all Americans do not have a monthly personal budget in place. If you're among them, now is a great time to start one. Even if you don't establish one in time for the holidays, at the very least get one set up for next year.
The process is simple: List all of your income on one side of a page, and list all expenses on the other. Once you are able to examine your entire financial picture, find ways to keep your spending below your income. You can clip coupons to save on groceries, or adjust your thermostat to save money on home energy. The list of ways to save on personal finances is endless.
No one is going to manage your finances for you, and it's a fact that either you run your finances, or they run you. So somewhere in between Turkey Day, Black Friday, and New Year's Eve, schedule a little time take control of your money situation. That way, you can ring in the New Year with a degree of financial confidence.
What other tasks do you think should be accomplished before the end of the year?