With 2019 on the horizon, it’s important to take a look back at how your finances fared this year.
The end of 2018 is in sight. Between wrapping up the year and wrapping up gifts, this time of the year is always busy. But never forget that it’s always a good idea to spare a few moments for personal and financial reflection.Don’t wait for the next tax season to go through your records. You don’t have to file them right away, simply gather them together in one place that you have easy and secure access to, so when the time comes to go through them, you’re a step ahead. This collection should include IRS forms, tax-deductible receipts and personal income records, so you can take a look at the big picture of your finances. If you do this before the end of the year you can also elect to take the section 179 tax break on any equipment and office supplies you purchased for your practice.
By staying organized you can make sure you’re sticking to your financial plan. On a personal and business level, a financial plan is crucial to making sure you maintain good financial health. According to Charles Schwab Modern Wealth Index, people who practice financial planning were projected to have better fiscal health and a higher likelihood of not having to live paycheck to paycheck. Compare that to the 68% of people who live paycheck to paycheck who don’t practice financial planning, and its benefits suddenly become clear.With the end of the year also comes the season of giving, and charitable donations are not only the noble thing to do, they’re also good for your taxes. You have until December 31st for any charitable contributions you plan to deduct from your tax return. You will also need a bank record or written communication to document the charitable contribution. Donations are not limited to cash, they can also be via credit card and check as well. If any of these contributions are over $250 you will not only need a receipt for the item and written record, but also a more detailed description of what you gave. It’s important to have both short term and long term personal and financial goals. Take the time to assess how your savings stack up against the goals you set at the beginning of the year, and take a look at how much closer you are to retirement, or buying a new house, or new car. Whatever your long-term goals are, now is the time to make sure you are on the right path.
Change is also a natural part of life. How did big changes affect your finances this year? Maybe you got married, had kids, moved, or had grandkids. Whatever change occurred it probably brought financial changes with it. Now is the time to adjust to your new reality for the foreseeable future. Being able to look at your finances with perspective will make sure you aren’t suddenly scrambling for a financial solution during a crisis. If you’ve gotten organized and taken in all the big picture elements, it’s time to get down to the nitty gritty of your monthly, weekly, even daily finances. Where you stand financially will always come down to income versus expenses. How much comes into your accounts, and then how much goes out is a simple equation, and one you should know like the back of your hand.
While it’s easy to hand over your credit card for a quick purchase of coffee or lunch, these small purchases will add up over time. So, analyze your monthly income versus what you spend in a month to really determine how and where cutting costs outweighs the upsides of luxuries. By looking at this information for the whole year it will give you the best sense on how to spend and plan your expenses for next year.