Smart Money: Easy Ways to Get Your Financial House in Order
With the end of the year fast approaching, this is a great time to review your finances and develop new strategies to reduce your 2015 taxes. Here are some easy tools and tips to help you save money and time.
Organize Your Finances
If your day-to-day money management strategy consists of a savings account and a checking account with an old-fashioned paper checkbook with a vinyl cover, consider expanding your financial horizon to include state-of-the-art expense tracking, budgeting, cash flow management, and other useful tools. Order top-ranked Quicken software (quicken.com), or sign up for a free online personal finance solution such as Mint (mint.com) or Buxfer (buxfer.com), and download the app for easy access on your smartphone.
Get Ready for April 15
Get out your 2016 calendar and schedule an appointment with your accountant or tax professional in early February, right after 1099s land in the mailbox, to get a jumpstart on your taxes. He or she can help you review your earnings, retirement contributions, and other investments, and suggest strategies to reduce your taxable income.
Spend Down Your FSA
If you have a Flexible Savings Account (FSA) through your company, review your 2015 expenditures to see how much you have left in your account. If you have $500 or less, check with your employer, as you may be able to carry the balance over into March 2016 without penalty. If you have more than $500, order that new pair of prescription sunglasses you’ve been thinking about, or visit FSAStore.com, a website that sells more than 600 FSA-approved items, including first-aid kits, cold and allergy medications, vitamins and supplements, and sunscreen.
Manage Your HSA
If you have a high-deductible health plan with a Health Savings Account (HSA), review your balance and
refill your prescriptions or other qualified purchases before December 31st. If you have not yet contributed the maximum to your account in 2015, talk to your accountant or tax professional about making additional contributions before April 15, 2016. Unlike an FSA, the money in your HSA rolls over from year to year, and you can invest the money in your account. If you’re an individual, you can contribute $3,350 to your HSA, with an additional $1,000 if you’re 55 or older. If you have an HSA for your family, the limit is $6,650.
Max Out Your 401(k) and IRA
If you’ve had a banner year at work (or won the lottery) and have wisely stashed away some cash, talk to your accountant or tax professional about maxing out your 401(k) and IRA, or opening a Roth IRA, which allows you to withdraw the money tax-free during retirement. If your employer offers matching contributions, review your most recent statement and make any necessary adjustments.
Give to Charity
One of the most satisfying ways to reduce your taxes is with a cash contribution to your church, synagogue, or other religious organization, a non-profit school, the Salvation Army, or other charitable organization. If you have a car, motorcycle, or boat that you no longer need, you can donate it to a non-profit and deduct the fair market value from your taxes. You can deduct up to a maximum of up to 50% of your adjusted gross income on your 2015 taxes. If you’re feeling especially generous and want to exceed the maximum, you can carry the excess forward for up to five years.
With these strategies in place, you’ll find it easier to keep your financial house in order in 2016.