2021 is full of hope and new beginnings. Whatever 2021 has in store, you can better prepare yourself financially with these 7 tips.
File your tax return ASAP
Filing your tax return early means getting your refund sooner. It could also thwart refund-stealing identity thieves. Also, if you were owed a stimulus check in 2020 but didn’t receive one, you can claim the missing money on your return. If you owe the IRS, it’s better to know sooner rather than later. You’ll have more time to find the money or make a payment plan.
Check your withholdings
Once your 2020 tax return is prepared, use that and your first pay stub from 2021 to see if you’re on track with tax withholding. Using a good tax withholding calculator can help you determine how to adjust the amounts taken from each paycheck. Contact your employer if you need to make changes.
Adjust your retirement savings
Consider increasing your retirement contributions. Take full advantage of any available company match in a 401(k) or 403(b). Look into funding a Roth IRA. A Financial planner can make recommendations to better prepare you for retirement.
Check your spending
Budgeting apps and personal finance websites can help you see where your money went in 2020 and help you make a plan for 2021. Also look back over credit card statements. You may see some spending patterns that you want to change.
Set up your savings buckets
Preparing for the little emergencies that come up can help you feel less panicked when those bills arrive. These expenses can include insurance premiums, property taxes, car and home repairs, back-to-school shopping and holidays. Check your spending in each of these areas for the past few years to ballpark how much to save this year.
Put charitable contributions on automatic
Many charities prefer getting regular donations throughout the year. You may find it easier to give to your favorite charity if you’re not trying to squeeze your contributions in with other year-end spending.
Spend your medical FSA
Flexible spending accounts are an employer-provided benefit that allow you to put aside tax-free money for medical expenses. If you signed up for your employer’s medical FSA, try to spend that money as early in the year as possible. That way, you don’t risk leaving money in the account and potentially losing it.