This year’s tax deadline is fast approaching. If you are thumbing through dusty files, shoeboxes full of receipts, or even piles of loose paper work, it might be time to put a better system in place. Come tax time, your finances should be organized in such a way that you can easily sort through what you need to file your taxes. With these tips, you can save time and money, and probably many headaches when dealing with your finances.
1) Bank accounts
If you have several bank accounts with different institutions, it is a good idea to consolidate. You could be incurring unnecessary fees and have to sort through piles of paperwork. With one bank, you can view statements online, set up automatic deposits and bill pay.
Much of your paperwork can be tossed. If you are hanging onto ATM slips, magazines, manuals, you probably have too much paper clutter. Reconcile your credit card statements monthly and then shred, unless you need them for tax purposes. Often times many of these items can be found online, reducing the need for paper clutter in your home. Always shred anything that you think is sensitive, because identity theft is common and you do not want to hand a thief any information that would be otherwise difficult to find.
3) Go Digital
Instead of saving copies of paperwork, invest in a scanner and only keep images of the paperwork you need. This takes up much less room than a cabinet full of files and with a good file labeling system; it is much easier and faster to find the documents you need. Within each tax year, you should create a minimum of four folders for income, expenses, home, and investments. Add any other files that might pertain to your individual situation.
4) Go paperless
Help the environment and your sanity by going paperless. You can view all of your statements online and download a .pdf of the documents you need into that years tax file on your computer.
5) Clear old files
According to the government, you should keep your taxes and paperwork for about 6 years. After this time, you can start discarding or at least lightening up your files. Documents that you need to keep should be sorted by year and stored in weatherproof boxes. Everything else should be shredded and recycled.
6) Check your credit
Tax time is a great time to remember to check your credit. You can obtain a free copy from annualcreditreport.com and verify that everything looks accurate and there are not any errors bringing down your score.
7) Pay off debt
Credit cards can carry high interest rates and credit card debt can negatively affect your credit scores. If you have debt on several cards, make a plan to pay down or pay off your debt. If you are receiving money back from your tax returns, use it to pay down your high interest credit card debt.
8) Check your withholdings
If you owe the government money at tax time, you might want to consider withholding a little more money throughout the year so you are not stuck with a big expense. If you are receiving giant refunds come tax time, it might be a good idea to withhold a little less, so month to month you have more money in your pocket.
9) Use technology
There are many tax software programs you can use to get your financial house in order. Whether it is software that helps your organize your money or allows you to file your own taxes, take advantage of what is available. You will save money by not having to visit an accountant at tax time.
Every year it is a good idea to reevaluate your insurance coverage. Make sure you have adequate home, auto, health, and life insurance (plus whatever other insurance is necessary for your well-being). Sometimes you can save money by bundling your coverage with one company.