Tax season is always an interesting time in people’s financial lives. There’s nothing like reviewing how much you spent, how much you earned, and how much you did or didn’t save, to stir things up in your relationship with money.
Read on to learn about the nine reasons to file your taxes today and to hear the gory details of my tax prep experience this year.
Practice Boundaries
It takes time to work on your taxes, so this year I blocked out an entire day to work on them – no clients, no husband, no phone calls, and no to-do list. I surrounded myself with my laptop, files, bank statements, notebook, and the Money Minder – my primary money management tool.
Enjoy Self-Care
I dressed in comfortable clothes, ate breakfast, put some of my favorite music on and poured myself a pot of tea – a ritual. I looked forward to my acupuncture appointment and dinner with a friend the next day – a reward. If examining your money makes you feel anxious, then be sure to reengage the basics of self-care – eight hours of sleep, eating well, drinking plenty of water, and getting regular fresh air and exercise. If a consistent routine of self-care does not counter balance your financial irritability, consider inviting in a financial confidant or accountability partner. You don’t have to do this alone!
Identify and Stop Leaks
In the process of preparing my finances for my CPA, I discovered and stopped a few expensive leaks with my cable bills, hot-spot wireless service, and credit card processing fees. Focusing on my taxes and annual totals forced me see the thousands of dollars I’m spending per year in fees on my business.
Declutter Your Space
Tax time is a great opportunity for you to get organized. If you haven’t already, now is the perfect opportunity to move all of your 2013 paperwork into a marked binder, box or envelope. If you’ve been procrastinating on selling unwanted items of value or filing for medical reimbursements, now is the time to do it. Move that never worn collection of designer heels to where it should be, in the hands of high-paying customers on eBay. Having more space is just one of the benefits of being financially savvy!
Expand Your Peace of Mind
After reviewing my records, I took a closer look at my action plan – my list of financial housekeeping tasks. I finally got closure on a few outstanding items that were weighing me down. I found an unopened envelope of my car registration. I discovered that I had a class credit at a local dance studio, and I finally responded to repair inquiry from last year that resulted in a $70 credit. Following up and resolving these quandaries relieved some stress.
Look at the Big Picture
My husband and I decided to track some unknown expenses, also known as “money fog”. Through the process of working on my taxes, I saw I had $1,112 of money fog in the second half of 2013. That was an average of $185 a month – it adds up! We asked ourselves what’s working, not working, and what changes do we need to make to prevent losing this much money in the future. By the way, I recommend completing your 2014 annual plan and net worth assessment by April 15 at the latest.
Plan Ahead
Years ago when I was newly self-employed, I actually mailed tax payments to the IRS and State every month – that’s what worked best for me at the time. Now, I have a tax savings account set up with monthly automatic savings. My income increased last summer and my Q3 estimated tax payment was more than double the previous one. I actually prefer paying my taxes throughout the year to owing a lump sum every April. Remember you have choices – one of the greatest luxuries in life!
Increase Income
Good news. We’re getting a refund — something I call sudden money. Sudden money includes tax refunds, bonuses, reimbursements (small or significant), other refunds, inheritances, and periodic income such as book royalties, sold personal goods, etc. And no, payday is not a form of sudden money. We literally found money and increased our inflow by identifying and stopping leaks, inquiring about credits, and filing for reimbursements.
Satisfy Needs and Wants
As with any form of sudden money, I suggest considering the Rule of Thirds. Pause and think about the possibility of putting a third of your tax refund towards the past, a third towards your present needs and wants, and a third towards your future. Absolutely treat yourself and be mindful, but a core value of financial well-being is responsibility.
It’s essential to stay connected to your whole financial picture. The past can include student loans, mortgages, car payments, personal loans and credit card debt. Your future can include a travel savings account, periodic expenses savings account, safety net, retirement account and other investments. When sudden money comes in, use the Rule of Thirds to take a step back and make a sound decision.
Set yourself up for success today and remember early is good – as soon as you file your taxes, you will have clarity, a refreshed action plan, more counter space, and more money.