Get Ready for 2012 with Tax and Financial Planning Now

Dec 2011

Well, the hustle and bustle of the holiday season is just about over, and another year will begin anew.

An occupational hazard of mine is always being months ahead, as finances and tax issues are so date-oriented. Needless to say, I am already well into tax-season mode. I thought this would be a good time to touch base on some tasks we can complete to get our financial house in order for the new year.

If you don’t already have an envelope or file folder for tax-related paperwork, do so now. Anytime I have a bill or item that I know I will need for tax preparation, I put it in my tax folder. Now through January, I am starting to organize the paperwork I’ve collected for 2011 to get ready for tax season. When I go through the various receipts, it’s amazing what I can accumulate; and by not doing this it would be easy for me to miss some items like donations I made early in the year.

I also go through saved bills and other confidential papers and do some shredding to clear out the file. Whenever I can, I sign up for paperless or E-delivery with my statements and bills. It really has cut down on the paper I receive in the mail and with that comes less shredding I have to do each year as well.

Another item that is worth doing at the beginning of the year is a quick budget. It helps to go list all your monthly expenses and the money coming in each month and see where you are at going into the New Year. I often find small areas that I can cut down on and try hard to do so to help save a few extra bucks for that summer Vacation (always look forward to that!) or contributions to my Roth IRA account. I also like to compare this budget with the one I did for the prior year to see how things have changed. If you complete this task, go one step further and put together you assets and liabilities (debt) to see what you are worth. List all your assets like savings, retirement accounts, value of property, collectables and the like. Then subtract from that a total of all your debt, which includes mortgages, credit card debt, home equity loans, car loans and college loans. . With a bit of luck and good planning you will be in the black! If not, it’s definitely time to take a hard look at that debt and try to pay it down.

I’d start with the credit card debt, paying off the highest interest rate cards first. You may be able to transfer it to a lower-interest card. Credit card companies are starting to offer more deals, with a possible zero interest rate intro offer, but watch out for transfer expenses and what your interest rate will be after the intro-period ends. If your mortgage rate is high, check on possibly re-financing. If you have a home equity line and itemize your deductions, you should consider paying that credit card debt with your home equity line, which enables you to stop paying interest to the credit card companies and will be able to take a tax deduction for the interest on the home equity line. One word of caution, if you do this to get out of debt, you want to try very hard to pay off your future credit card bills every month, so as not to get in this situation again.

Another annual habit I’m really glad I started doing is checking my credit report annually. Between now and filing my taxes, I go to and check all three credit agencies. You can do this for free once a year. I just take a quick look to make sure all items listed are accurate and there are no discrepancies or unknown items showing. It is a great way to make sure nothing fraudulent is happening with your credit or identity.

Hopefully these recommendations will be useful to you in starting 2012 off on a positive financial footing!


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