The new year is a great time to set new goals for yourself. What better way to start out a new year than with some self-improvement initiatives. A common goal people set at the beginning of a new year is to commit to saving for their future, whatever it may hold.
There are many ways to achieve your financial goals this year, and every goal can be addressed differently. According to U.S. News & World Report, some common financial goals include:
- Paying down debt
- Preparing for tax season
- Creating a financial plan
Paying down debt
If your goal is to pay down debt, you are not alone. According to NerdWallet, the average American’s debt is $129,579. There are many ways to tackle this hefty sum, though even the best strategy will take some planning, time and careful budgeting.
The first thing you should do if you plan on paying down debt is determine:
- How much you owe, total
- Which accounts have the highest interest rate
- Which accounts have the highest balance
Laying this out will help you prioritize your debts and figure out a plan. If one of your debts is a mortgage with a high interest rate, refinancing the loan could help put you in a better position to pay it off going forward. Mortgage refinancing could result in a lower interest rate, which may decrease how much you will pay over time, or it may lessen the amount of time you will spend paying off the mortgage. If you have an adjustable-rate mortgage, refinancing could give you a more predictable monthly payment with a fixed-rate mortgage, so it’s easier to budget your monthly expenses.
Preparing for tax season
It’s important that everyone who earned an income in 2015 file taxes. Neglecting to do this, even if you are self-employed or made a small amount, can come back to haunt you in the form of late fees, a forfeited return or even arrest, according to U.S. & World News Report.
H&R Block suggested to prepare for tax season, gather all information regarding income, including W-2s from employers, forms from self-employment, any earnings you made from rental properties and any other way you generated income in the past year. Also collect everything regarding educational payments, contributions to retirement plans and any deductions you may qualify for.
“Neglecting to file your taxes on time can result in legal penalties.”
Once you have everything together, decide how you want to file your taxes. Some people choose to do it themselves, while others go to a professional to make sure nothing is omitted. Remember, filing early may result in an earlier refund, which you can then apply to other financial goals, like paying down debt or saving for a future purchase.
Create a financial plan
A great goal to have this year is to form a financial plan and stick to it. This will help you prepare for future financial goals, whether they are to buy a home, help pay for your child’s college education or retire comfortably without having to go back to work.
According to Get Rich Slowly, there are several items a financial plan needs to include:
- How much to save and where to save it
- How to invest savings until they’re needed
- When you will tap into these savings and how much will you take out
By creating a financial plan, you will feel confident in your other financial choices, knowing you are preparing for the bigger investments you wish to make further down the road.