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New Year's tax and financial resolutions

Photo via Unsplash+ in collaboration with Monika Grabkowska

Happy New Year! I know, it's already two days old, so I'm a bit late. But I'm cutting myself some slack since it's the first work day of the year after a three-day holiday.

I'm also cutting myself some slack when it comes to annual resolutions. I'm not making any.

It's not that I'm opposed to setting goals. But I hate that annual judgy list. I'm still working on some prior year intentions, so I don't see a need to add to my tasks.

If you, however, like to start off each new year with clearly delineated goals, go for it.

In fact, I'll contribute to your self-betterment efforts with not necessarily resolutions, but seven tax and financial moves to make, or at least start, this month.

1. Evaluate your estimated tax situation. Millions of taxpayers must make these annual estimated tax payments four times a year. It's the Internal Revenue Service's way of collecting tax on earnings that aren't subject to withholding, such as full-time self-employment income, side gig money, investment earnings, and gambling winnings and prize money.

The final estimated tax amount for such 2023 income is due on Jan. 16. The 2024 payment schedule starts on April 15, the same day by which you must wrap up your 2023 taxes.

This tax year crossover period is a good time look at your estimated tax situation. If you've been regularly making 1040-ES payments, you know that the IRS prefers you estimate what you'll owe and make four equal payments. But if you find your money subject to estimated taxes is uneven during the year, you might want to consider using the using the annualized income option of paying estimated taxes.

This estimated tax payment method does require accurate record keeping. You also must use those records to fill out another tax form. But you end up paying a larger estimated tax amount in the earning period that you actually made more money.

2. Create a realistic budget. Budget is about the only word that people hate almost as much as taxes. They tend to view both as money-related punishments.

In reality, though, a budget isn't about deprivation. It's a plan to get what you want in a way that allows you to keep and enjoy it.

The key is tailoring a budget that realistically accounts for your income and priorities. This includes not only the necessities (housing costs, food, utilities, transportation), but also leisure pursuits in your budget.

Yes, you can budget for fun. Just don't go overboard. Like I said, the financial planning process is not about deprivation. In fact, a good budget should be balanced, not just at the dollar bottom line, but also in how it applies to your life's needs and wants.

Plus, a budget that includes some rewards helps you maintain a positive outlook. That, in turn, makes it easier to stick to your budget and meets its goals.

There are several money management and budgeting tools that can help. NerdWallet's budget app list includes both free and for-fee choices. , both that require a fee. CNBC Select's analysis focuses on the free options.

3. Start or add to your emergency fund. Life seems to be a series of emergencies. Not all are big or life changing, but all carry some financial cost. Like the $750 I had to come up with amid holiday preparations to get my car's starter fixed. That's why you need to budget for these unexpected turns.

A separate, dedicated account can help you cover unforeseen expenses like my car repairs or the insurance deductible for your child's unexpected dental needs. An emergency savings account also provides a cushion if you lose your job, helping you cover day-to-day necessities until you find more work.

4. Increase your retirement savings. If your retirement is a long way away, now is the perfect time to start savings for it. The power of compounding and reinvested earnings will help create a nice nest egg by the time you say goodbye to the 9-to-5 grind.

If your workplace offers a 401(k) or similar defined contribution plan, enroll now. Try to put in enough from each paycheck so that get your company match. You also can set up a separate IRA. A Roth IRA is the best deal for younger workers, since they'll be able to withdraw the funds tax-free in retirement.

If you're older and still on the job, boost your retirement savings as much as you can. Catch-up provides allow individuals nearer retirement to put more money in workplace or accounts or IRAs.

5. Pay off at least some of your credit card debt. A drop in spending during the COVID-19 pandemic helped ease the nation's overall credit card debt. But by last summer, with most of us returning to our normal patterns, U.S. consumer charging of purchases reached a new milestone, with balances totaling more than $1 trillion.

Holiday spending added to that debt load. Now, credit card holders are looking at balances that now are subject to monthly interest charges upwards of 30 percent.

If your work situation now is more stable, start paying off those high-interest accounts. You can pay off the highest credit card debt first. Or you can start with the smallest amount. Either way, stick to these accelerated payments to whittle down and eventually eliminate the debt.

You also might want to consider consolidating your credit card debt onto one card that doesn't charge interest for at least a while. That will give you a chance to pay it down without interest payments undercutting your efforts.

6. Get automated. The best way to save money is to remove the temptation to spend it. Automated financial options make this easier to accomplish.

Your workplace 401(k) plan is a great example. The money comes out of your pay and goes into the account without you even knowing. Do the same with your emergency fund. Most banks, credit unions, or other financial institutions are happy to help you set up automatic payroll transfers to that account.

The same approach applies to easing credit card debt. If you use an online bill payment service, set up your added payments there. Credit card companies also offer automatic payment options.

7. Prepare for tax season 2024. Since these January moves/any year's resolutions started with taxes, let's return to that topic to wrap up this list.

Many individuals will be filing their 2023 tax returns soon, like this week soon. These typically are taxpayers whose financial and tax filing situations are less complicated, and who are expecting a tax refund.

But even if you're not quite ready to file your return, now is a good time to get ready for the task.

Tax documents you'll need to file — W-2 and 1099 forms, and other associated statements — will be issued this month. Pull out your 2022 return. It'll will give you an idea of what documents you got last year. In many cases, they'll be the same for this filing season.

Make sure that the payers issuing the docs have your correct mailing address. Also double check that your email on file is correct. Many institutions send electronic messages when your tax statements are available at the company website, so you can go there and download it instead of waiting for your snail mail copy.

Once these documents start rolling in, designate a safe place to store them. And make sure it's a place you'll remember if you don't plan on filing until nearer the mid-April deadline. This can be a special desk drawer, a file in a cabinet, a box on your home office desk, or a computer file for all the tax PDFs.

OK, I know that's a lot, especially if you had a particularly good time at a New Year's Eve party last night. You can bookmark this post and come back when you're feeling a bit more equipped to deal with finances and taxes.

More January tax moves: Where these seven moves apply, they can help ensure that your 2024 will financially and tax happy.

And if you're ready for even more tax tasks, I applaud and envy your post-holiday energy and enthusiasm. You can find more in the ol' blog's usual monthly tax tasks list in the right column, just beneath the countdown clock ticking off the time left until our 2023 1040s are due on April 15.



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