When the New Year rolls in, you may spend the first few hours of it
nursing the effects of the last few hours of the year that just was. When you think about it, the weeks after tax season are just like a new financial year – you have just paid your taxes, all your payments to the government are squared up, and you have a whole new taxable year in front of you.
Unfortunately, the hangover can be just as bad as it was January 1. If you have just barely paid your taxes and your returns were not what you thought they were, you might have been relying on your credit card a little more than you should have been. Maybe you even had to borrow to pay your taxes. Fear not. It’s a whole new year and just a few resolutions can make next year’s tax season far less painful:
1. Pay yourself first.
Sure, it’s a cliché, but setting aside even a very modest nest egg can ease a lot of those little financial emergencies – and no, we don’t mean a shoe sale at the mall. Set up a savings account and have 10% of your income automatically deducted into it. You won’t miss 10% but you’ll sure be grateful for your forethought if you owe Uncle Sam something next year or if you find yourself unable to make payments on your credit cards.
2. Close up some accounts.
If you have three checking accounts, you arepaying three times the fees. If you have three credit cards, you are paying more interest than someone with one. Keep the accounts you have had longest (this is important to keep your credit good) but close down any accounts you don’t need. You will save a lot of money – which you should re-invest in your savings account.
3. Start reading the paperwork.
Dig out your credit card agreement from the bird cage, start reading your credit card statements each month and order up your credit report once a year (it’s free). It’s not exactly thrilling reading – make a pot of coffee – but it is important to know what is going on with your finances. Is your credit card agreement favorable to you or could you get a better deal elsewhere? Are you noticing unrecognized charges on your credit card accounts? Call up your credit card company and investigate. Are you noticing unrecognized accounts on your credit score? Identity theft can happen to anyone, toots, so make sure you call up your credit bureau immediately if you notice anything amiss.
4. Start paying down your credit cards and other debts.
Lots of debt drives down your credit score and all those payments cut into your paycheck, which is no fun. Paying just the minimum on your debts will not get you anywhere, so come up with a plan of attack. If you have lots of credit cards and other types of debt, consider consolidating all your debt into one larger debt – with the lowest interest rate you can find, of course. Then start paying off at least 50% more than the minimum payment each month. Don’t you feel lighter already?
Don’t use the new financial year as a time to reflect on the mistakes you made over the last 12 months, use it as an opportunity to plan for how you’ll do better over the next 12.
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