Some of us dread tax season more than any other time of year. For one thing, it’s right after the holidays, when many people are struggling to pay off their holiday credit card spending. And for another, doing taxes means taking stock of everything you earned and spent during the previous year. This is usually not a fun task. But while you’re doing it, why not use the opportunity to revise your budget and rethink your finances?
Tax time is actually the very best time to dig deep and take a close look at your financial life. Take the time to really look at what came in and what went out over the past year, and consider the following questions as you look over your accounts and receipts from the last 12 months:
– Am I in debt? How much do you owe on your mortgage, your student loans, your car loan, or any business loans you are carrying? Do you have credit card debt? Now is the time to take stock of what you owe, and think about whether you’ll be able to keep up with the payments, or even pay a little more this year. One great thing to do with a tax refund is using it to pay off debt. While it’s tempting to spend the money as if it were “found” money or mad money, using it to pay down debt will benefit you in the long run.
– Is my budget working for me? As you look over your receipts, does it seem like you’re spending about what you’d planned to spend in certain categories? Look at how much you’re spending on groceries, versus how much you spend in restaurants. Add up your travel expenses. See if they are within the ballpark of what you should be spending on these things, and if they aren’t, think of ways you could tweak your spending habits to be more in line with your budget.
– Do I use credit responsibly? If you have a credit balance, think about what you could do to wipe it out, and then to avoid getting into a jam again. If you aren’t using credit very much, consider getting a cash back or a travel rewards card, so you can stretch your money and get something back for your spending during the upcoming year.
With some strategic thinking, tax season can be a time of renewal and change, for you and for your bank account.