Though 2019 is still a few months away, your personal finance habits don't adhere to calendars. There's never a bad time to reassess your spending, income and savings potential.
In fact, any time you make proactive decisions on behalf of you and your family's budget, you're likely to uncover better ways to finance your life and save money in the process. If that doesn't sound like a good time, then we don't know what does.
We've listed out a number of ways you can head into 2019 with confidence in your financial situation.
Double- and triple-check your tax withholding
This one always seems to escape the minds of employees. If you've received a raise or the number of your dependents has changed in 2018, you'll want to ensure these updates are reflected on your relevant tax forms through your employer.
It's not uncommon that a worker heads into tax season without having the proper amount of taxes withheld from their pay stubs over the course of the year. Then, after expecting a refund, they actually end up owing money because not enough of their income was withheld upfront.
It's a sad day indeed to have to write the government another check on top of all the taxes you've already paid. Speak with your employer to track down your most recent W-4 and fill out applicable information in relation to your allowances and exemptions.
Speak with an accountant to understand how tax legislation affects you
The Tax Cuts and Jobs Act signed into law by President Donald J. Trump in December 2017 rewrites the federal tax code in significant ways.
While there are still seven tax brackets for individual and married filers, the average person can typically expect a reduced tax rate effective 2018. Because this is the first year under the new tax code, accountants and the IRS are still coming up to speed on proper filing procedures and best practices
There are also changes to common filing and deduction options that differ from previous years. For instance, more Americans will likely be taking the standard deduction, which was increased, rather than itemizing deductions for charitable giving and investment fees, both of which were reduced or eliminated in most filing circumstances.
Needless to say, your accountant is going to be getting their money's worth this year as they are busy wading through all the minutiae. Rather than filing your tax returns yourself or using a service like TurboTax, it may be beneficial to sit down and have an actual conversation with an accountant to learn how the new tax system works and how you might be impacted in 2019.
Begin budgeting for holiday season
Thanksgiving, Christmas, New Year's Eve … these occasions cost money!
Depending on how giddy you get about holidays, you may already be making travel arrangements to visit distant family or make the most out of your kids' winter break. Or, you could be a go-with-the-flow type person, which, if you are, then bless you.
In either case, what you've spent so far in 2018 likely can't be extrapolated across the remainder of the year because the holidays cause a noticeable upswing in expenses. Recalibrate your upcoming budget to account for gifts, entertainment, lots of food, travel and maybe lodging.
When 2019 hits, you won't be suffering from carryover expenses or have to put purchases on your credit cards.
Think about financial resolutions you can pursue
Not everyone makes resolutions for the new year, but there is a definite value in setting a goal, executing on it and accomplishing it.
Common financial resolutions people pursue include:
- Maxing out 401(k) contributions.
- Slashing spending by 10 percent across the board.
- Finding simpler ways to save every day, like using a change jar or making your own coffee.
- Saving for at least one vacation.
Review auto-renew subscriptions
Subscription services are the best. You can get your groceries delivered whenever you want, watch any movie on the web and even treat your pet with new toys every month - all done through the convenience of subscriptions.
This all sounds great, but it can also lead to scope creep. Over time, one or two subscriptions turn into four or five. These are essentially rolling, monthly retainers on your checking account, and many companies design their pricing models to auto-renew at the end of the year once they have your card on file.
Take stock of how many services you are using that are set to autopay, including your phone, promo deals on utilities, antivirus software and charitable giving. You don't have to scrap them all, but you can likely drop one or two. You may also be able to speak with a customer service rep at one of these respective providers and negotiate for a lower monthly payment.
Don't let the year pass by with an out-of-sight, out-of-mind mentality: It leads to higher expenses.
Run a 360 audit of your spending levels so far in 2018…
It's not just subscriptions that can unexpectedly drain your pocketbook. There are a number of other factors that may or may not be planned for, which inevitably cost you, such as:
- Medical expenses.
- Rising transportation costs.
- Car or home maintenance.
- Additions to your family or changes in your living situation.
Categorize all your expenses into buckets, such as "home care," "entertainment" and "miscellaneous." Where are you spending more than your realized?
Knowing how far you've veered from your original 2018 financial goals gives you time to course-correct in the remaining months of the year.
...and cut what you can
By course-correct, we mean reduce expenses from some categories or perhaps just retain your existing spending levels and shift money between categories. In the latter case, for instance, you might start budgeting more money for "entertainment" in expectation of the upcoming holidays, taking that money from "home care" if you don't plan to make anymore remodeling or upgrade decisions on your home in the foreseeable future.
If there are clear examples of splurging, then, yes, cut what you can. Things like:
- Eating out more than once or twice per week.
- Taking the kids shopping outside of back-to-school season.
- Buying coffee or lunch at work.
Obtain a free credit report
Every year, consumers are able to receive three free credit reports, one from each of the top three credit reporting bureaus: Experian, TransUnion and Equifax.
"Even if you're comfortable in your current job, adding a few more skills to your resume never hurts."
It takes only minutes and you'll receive an email that details your credit standing, as well as red flags that may be on your report. If you notice anything that seems incorrect, such as a missed payment for your electricity bill that you know you for sure paid, call the credit reporting agency to clear up the dispute.
Agencies are capable of revising your report, thus potentially providing a boost to your FICO score and improving your odds of receiving better interest rates on personal loans.
Rearrange savings to capitalize on deductions
Contributions to traditional and Roth IRAs may qualify for tax deductions, with many factors at play, including filing status, modified gross adjusted income, eligibility in employer-sponsored retirement plans and other small points that you should speak with an accountant about.
For instance, those under 50 can typically contribute up to $5,500 a year into an IRA, whereas those over 50 can contribute $6,500.
Shifting your savings strategy to accommodate these potential benefits can save you hundreds or thousands of dollars during tax season.
Book family vacations now
Plan ahead for your holiday travel but also your longer trips in 2019. Yes, summer 2019 seems far away, but when you've got several kids, available PTO days, work schedules, travel costs and, potentially, exchange rates, settling on a destination and booking early can save thousands.
Thinking this far ahead also helps shape your future spending strategies. For example, it may be best to use your credit card on more purchases moving forward so that you accrue more rewards points that can be converted into travel discounts down the line.
Experiment with money apps
There are a million out there, and more are developed and launched each day. We're not recommending some over others. There are tangible benefits to using money-management apps that automate savings, alert you of overspending and set parameters on who can access your card and where it can be used.
Find one you like, and see how it impacts your life in the coming months so that you'll have a clear financial framework from which to operate in come 2019.
Update passwords to financial apps
Speaking of apps, most are designed to log you in with either a passcode or a fingerprint. While this is secure enough, consider the number of devices you use to access your banking info: mobile, app, laptop, phone call, snail mail, etc.
Each of these available options present numerous attack vectors for criminals to steal your login credentials, view your private financial information and, worst-case scenario, make purchases in your name.
Every six months or a year, refresh your passwords so that you can thwart criminals from viewing your account info as easily accessible. Additionally, never use auto-login features that save your password for convenience.
The more you can do to secure your banking data, the better.
Update your resume
Kind of an old-school recommendation, but it can pay dividends.
Even if you're comfortable in your current job, adding a few more skills to your resume never hurts. Do the same for your LinkedIn profile as well, as most companies today are using electronic recruitment software to identify candidates.
Although the economy is performing well, all things considered, you never know when layoffs may occur or when you might come across a better-paying job that you need to quickly jump at. Having a resume that's ready to be sent at any moment is a strategy that keeps you in tune with the trends in your industry and enables you to potentially move into a career that will dramatically benefit your standard of living.
Acknowledge 2019 economic projections
Trends point toward an economy that shows promising signs of job availability, low unemployment and high consumer sentiment. On the other hand, interest rates are rising and wage gains are still slow to materialize.
Take these projections as you may. Being cognizant of them at least allows you to guard against predictable market fluctuations that could impact your finances.
Revisit wills and trusts
Writing up a will and ensuring it's regularly updated seems like a task that is never high on the list of things to do. We get it; it's quite gloomy and downright tedious. But future you will thank yourself for undertaking this very task, as will your dependents.
Meet with your attorney to see if any updates are needed to your will or trusts, as it's understandable that your not only your financial situation may dictate an adjustment but also your personal preferences as well. Strategic wealth transfers across generations can have an enormous impact on the livelihood of your family, so while it's not something that necessarily needs to be addressed right at this moment, at least set aside time to review all pertinent documents.
For more information on banking options and personal finance tips, contact Landmark Bank
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