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January is over and for many of us, that means New Year’s resolutions are almost out the window.
But we still have most of 2016 ahead of us. Here are a few ways you can set yourself up for financial success this year and beyond.
1. Adjust your tax withholdings.
When it comes to income tax, the goal should be to come out even. On April 15, you don’t want to get a huge refund or a huge tax bill.
Getting a refund is exciting, and it’s not a bad way to accumulate savings. But remember, that means the government has held your money for the entire year without paying you interest. In essence, you gave the government a free loan. To avoid this situation, decrease the amount of income tax you have withheld by your employer.
If you’re in the other camp and receive a big bill, that’s another reason to revisit your withholding amount. In this case, you should increase the amount of taxes being taken out of your paycheck each month.
And if your life situation changes in the middle of the year — for example, you get married or divorced or have a baby — you should also take another look at your withholding amount.
2. Increase your 401(k) contributions.
At the minimum, you should contribute enough to qualify for your employer match, if you have one. If you have more money available, shoot for the maximum allowable contribution in 2016 ($18,500); if you’re over 50, set up additional “catch-up” contributions of $5,500.
Making these changes early in the year will ensure that you plan your monthly cash flow around your higher contributions. And if you wait until the middle of the year to adjust your contribution amount, you’ll have to save much more each month to reach your savings goal.
3. Review your employee benefits.
Check your company’s resources page to make sure you’re taking full advantage of the useful — and often free — benefits it provides.
Review your current benefit elections to determine what coverage — such as health, life or disability insurance — you have in place and whether it’s still adequate. Life changes — again, including getting married or divorced or having children — can be good reasons to adjust your coverage.
If you do need to make changes, ask about your company’s open enrollment period; this is often the only time you can make changes to your coverage, unless you experience a qualifying life event, like the ones mentioned above. On the other hand, you may change your 401(k) options on a fairly regular basis.
Pay close attention to your benefits. Incorrectly selected or overlooked benefits can cost you money.
The bottom line
Doing these tasks early in the year can help you commit to improving your finances in other ways during the rest of the year. So don’t wait — tackle these steps today to set yourself up for a financially successful 2016.
Image via iStock.