Smart Money Moves and Goals for Financial Progress in 2021

Smart Money Moves and Goals for Financial Progress in 2021

by | Accounting News, Budget, Financial goals, News

The beginning of a new year has long been associated with starting from a blank slate and setting new goals for the year ahead. While 2020 taught us that plans and goals can quickly veer off course through no fault of our own, maybe 2021 can teach us the value of planning anyway—even in the face of the unknown. The financial tasks set forth below will help you pay down debts, save money, and better prepare you for whatever 2021 has in store.

File Your Tax Return ASAP

Not only does filing early help stave off refund-hungry thieves, but, generally, the sooner you file the sooner you get your refund. If you’re planning on owing the IRS, it’s better to know early and make arrangements for payment.

Given the unemployment plunge of 2020, keep in mind that unemployment checks are typically taxable, so if you received extended jobless benefits, be prepared to face a potentially greater-than-expected tax bill.

Check Your Withholding

You can use an online income tax calculator to estimate how much you’ll owe in federal taxes. Use your prepared 2020 tax return and your first pay stub from 2021 to check that you’re on track with tax withholding. If not, the calculator can help work out adjustments to your paycheck, and you can contact your employer if you need to make changes.

If you’re a business owner, you may need to make estimated quarterly payments. Tax professionals can help you work out amounts and details.

Get Organized

There’s no time like the present to organize your financial life. All those paper receipts and statements scattered on desktops or tossed into random drawers? Corral them into labeled file folders, baskets, or envelopes. If you want to shed the paper clutter all together, go digital with an accounting software like QuickBooks. A digital snapshot of your finances will help you gain a better grasp for where you are financially before setting new goals.

Commit to Saving in a Realistic Way

Instead of just thinking about saving, commit to establishing a habit of saving by striving for a concrete goal. Set the amount and time frame for your goal, then come up with actionable steps on how you’re going to reach it. For instance, set up an automatic draft from checking into savings, take on a side hustle, and/or comb through your budget to see where extra funds could be found. In order to set yourself up for success from the get-go, be sure to be realistic. A goal of $100,000 in five years might be realistic for some people, while beginning with a goal to save $50 a month will be more on par for others.

Create a Budget

First, look back over bank and credit card statements from last year to help identify spending patterns and areas of improvement. Next, set a budget. Think of your budget as a roadmap of how you’ll save and spend your money, starting with essentials, such as mortgage, food, utilities, and healthcare; then move to recreation and savings. Keep in mind that your budget has movable parts, meaning life circumstances can change, even month to month.

Start an Emergency Fund

An emergency fund is exactly what it sounds like—funds set aside for an unexpected cost like car or home repairs. At the minimum you should aim for $1,000 to be put into an emergency fund, and try to work your way to saving three months’ worth of income.

Spend Your Medical FSA Early Rather than Later

If you have an employer-provided flexible spending account, spending it as early in the year has possible has a few advantages, including:

  • Acquiring medical expenses early in the year can help you meet insurance deductibles, so the rest of your health care can cost less.
  • If you leave your job at any point during the year, you can spend the full amount you had planned to contribute—up to $2,750—and aren’t required to finish making the full FSA contribution.
  • You mitigate the risk of not using the full amount by the deadline and potentially losing money.

Consult a Financial Advisor

Contrary to popular belief, you don’t have to be a millionaire to seek professional guidance from a financial advisor. Whether you’re looking for a one-time consultation or on-going advice, someone in the know can help set you on the path for long-term planning.

Survey Finds Americans Out of Touch with How Much They Spend

by | Accounting News, Bookkeeping, Tax Planning, Tax Planning - Individual, Technology

A new survey conducted by Rasmussen Reports for the Consumer Federation of America ? the COUNTRY Financial Security Index – shows a gap between what Americans think they’re spending and what’s happening in reality.

Only 9 percent of the 3,000 respondents of the survey said their lifestyle is more than they can afford, yet 21 percent say they spend more than they make at least a few months every year.

The survey suggests the so-called “perception gap” could shrink if more people used a household budget. Those who budget are more likely to set monthly savings goals (61 percent) than those who don’t (30 percent), COUNTRY Financial says.

Other tips:
Review your spending behavior. Take a look at where the money goes every month and make adjustments where needed, Brannan says.

Start a spending and savings plan. Put money in jars or envelopes or start a Christmas fund. When the money’s gone, stop spending. Some people are even stashing their extra cash under their mattress or in a bedframe outfitted with a safe. In fact, safe sales are up 40 percent from a few years ago, SmartMoney reported.

Rethink expenses. When Joe Mihalic earned an MBA from Harvard Business School that resulted in more than a $100,000 debt, he vowed to repay his debt quickly. He blogged about giving up dinner dates and movies, missing parties and weddings, ending 401(k) contributions, and staying home for Christmas. He stopped buying clothes, sold a second car and motorcycle, rented a spare bedroom, and started a side business. He told Fortune magazine, “A lot of people in this country – regardless of socioeconomic status – have an unhealthy obsession with things and experiences and statuses. We shop brands; we drop names. We try to keep up with the Joneses. We comfortably tolerate an unhealthy level of debt.”

Involve your children in your financial plan. Explain your goals for retirement savings and other things you value, Laura Scharr, principal of Ascend Financial Planning LLC in Columbia, South Carolina, told Fox Business. “Be honest and upfront with your children,” she said.

The COUNTRY Financial survey says budgeters and those who don’t budget do have one thing in common: They miss the mark on their savings goals. Of budgeters, 57 percent achieve their savings goals half the time or less, while the number is 54 percent for the non-budgeters.

How are Americans making ends meet when the budget runs out?

  • 36 percent raid their savings accounts.
  • 22 percent use credit cards.
  • 14 percent adjust their spending next month.

Full Article: http://www.accountingweb.com/topic/cfo/survey-shows-americans-need-spend-less-save-more-set-budget