When it comes to all of the hard earned money that you make, you do not want to think of it as being wasted or being flushed straight down the toilet by not paying attention. One way to stop yourself from using more money than you need to, or more than you can, is to start planning a personal finance plan. Keeping track of how much you spend, what you spend it on, and how frequently you spend it are all important things to keep track of. Another way that you are able to keep the most that you can out of the money you earned is to prepare yourself for taxes. It is also very important to know what strategies you can use to get back the most of what money you earned. Here is some information on both to help you make the most of your money.
Planning for Personal Finances
It is never too late, and especially never too early, to start making plans for saving up your money. Although the earlier that you start saving your money, the more it will pay off in the long run, just starting to save in general is a step in the right direction. If saving your money is something that you really want to start doing regularly, it is important to try and make yourself think of a general idea of what you want to start saving your money up for. Starting with a goal helps to motivate you and gives you a general plan so that you can start to actually put your plans in action. Some good goals to start with are things like:
- Buying a house
- Buying a car
- Saving for retirement
- Supporting your family
Although your goals may change 5 or 10 years in the future, they are still good to have to look forward to and can help you to start saving your money easier. When you really set your mind to saving your money, it really is not that hard to start. Many people have a hard time saving their money, whether it be for bills or bad spending habits, but it’s never impossible to not save some money. Once you see all the money you are saving begin to grow, you will be surprised on how much you have been missing out on this whole time.
One place to start when it comes to saving your money is looking at how much you spend each month. Take into consideration things like:
- Rent, utility, credit bills, phone bills, or any other monthly expenses
- Medical Costs
- Medicine, hospital bills, treatments, etc.
- Fast-food, alcohol, extra clothing, and anything else that you can think of
It is also important to take into consideration things like debt, loans, and any interest you may be paying on anything. You should also look out for deadlines you have to pay for things you may owe on and account for things like big purchases you may have in the near future. Although when you look at the list and some of the things you have to regularly pay for, it is obvious that it is unavoidable and sometimes money just has to be spent so you can comfortably live your life and have your needs fulfilled. This is why the non-necessities that you may find yourself buying a lot is where you really want to focus. Everyone enjoys being able to spend their money on what they want, whether they need it or not, and there isn’t a problem with that. What there is a problem with though is not keeping track of how much you really are spending. It may not seem like a lot of money is being spent at first, but both big and small purchases add up, and the numbers may be way more than you ever thought. When it comes to the luxuries in life, you do not always have to go without, occasionally spending money on non-necessities is completely okay. The only thing is that if you are looking to save money, it is time to start cutting down to what you can and what you can not fit in your budget.
Strategies for Planning Your Taxes
Although planning for your taxes is a little harder and more stressful than planning for your personal expenses, it is an important part of getting as much of your money as you earned. Some strategies to getting the most back from your taxes is to do things such as:
- Reducing Your Adjusted Gross Income – You can reduce your AGI through IRA contributions, moving expenses, paid student loan interest, and more. You can also reduce your AGI through tuition and fee deductions and self employment health insurance.
- Increasing Your Withholding – If you increase your withholding from your check, it takes out a larger amount from what you made. Although you will not have the money at first, you will get a bigger tax return that will pay off in the end. It will also help to you to make sure that you have enough to cover yourself when it comes to paying your taxes.
- Increasing Your Tax Deductions – If you are an independent contractor, there are tons of things that you can do to save yourself money when it comes to taxes. One thing you can do is just keep track of any work-related expenses you have so that you can deduct them later. Donations and investment expenses can also be considered for tax reduction. Things like electrical expenses, gas used to drive for your work, and programs you may have to purchase to do your job are all good points to start at when looking at what exactly you can and can not deduct for your work.
- Tax Credits – Tax credits are great when you want to lessen the amount of taxes that you will have to pay. Some tax credits include college expenses, saving for retirement, and adopting children. There are also other tax credits you can qualify for such as Earned Income Credit, Hope Credit, and Lifetime Learning Credit.
When it comes to doing your taxes, you want to make sure you are doing what is best for yourself and for your income. When you plan ahead for your taxes, it not only helps you from getting in trouble, but it also helps you to even save more than you originally could have. This year, think hard about how you want to save your money and watch it grow, the results will be worth it.