Budgeting Strategies for Personal Expenses and Taxes

Getting the most out of your labor means getting the most for your money. The two main areas in which most people could use improvement in this regard come down to managing their personal expenses, and engaging in smart tax strategies.

In this post, we’ll be outlining ways you can get the most out of both worlds, and how they are interrelated.

Personal Financial Planning

Let’s face it: it’s difficult to save money. Personal financial planning is hard. Most people don’t even begin to start saving money until their late twenties or early thirties, and many wait until much later. Once they do begin to save money, they’re often amazed at how quickly it adds up. The same goes for the opposite strategy.

It’s so easy to spend money on petty things, or small indulgences, and at the time you don’t think they will have much of an impact on your bank account. Those individual expenses do not, but the accumulation of them over time definitely do. Just add up how much you’re spending every month on coffee, alcohol, and going out to eat. The figure will probably sink your stomach.

The best solution is to sit down and create a personal financial plan. This should be done for both the short and long term. The first thing to do is this:

Guess where you want your finances to take you

The operative word here is “guess”, because life is constantly throwing all sorts of obstacles in our way, or rerouting us into places we never thought we’d be. That’s totally normal. You probably aren’t exactly where you thought you’d be, or wanted to be, ten years ago. In another ten years, you probably won’t be exactly where you’re planning on being either. The point is, rather than passively allowing the flow of life to push you in any direction, figure out a goal (any goal!) and start working towards it. This will get you a lot further, and result in better success, than not having a plan at all.

Another reason “guess” is a good way to go about it is because when you keep your goals somewhat vague, it also keeps them alive. It retains their variability, and keeps them rife with possibilities. It also mitigates the negative effects of any setbacks, which are not just likely – they’re inevitable!

Some goals that can be set, that you could financially be working towards, include:

  • Running your own business
  • Owning a house
  • Having enough money to support a family
  • Being able to travel more

Things along those lines.

Choose a starting point

It’s not enough to just set a goal. You have to know how to get there, and that means figuring out the best plan of action right now. This means figuring out your net worth by evaluating all of your assets and liabilities. This is the hard part, since it forces us to look at immature spending habits or monetary tragedies that aren’t fun to think about, such as:

  • Failed ventures
  • Debt increases
  • Bad credit

Rather than sitting around feeling bad about these issues, you can choose to accept them for what they are, and move forward from where you’re at right now. What other choices do you have?

Stop the silly spending habits

Or, cut down on them as much as possible. It’s a wise idea to give yourself a certain budget every month for the “silly stuff” – fast food, Starbucks, beer… Dedicate a small portion of your monthly income to these luxuries, and don’t exceed it.

Save as much money as you can

That means saving as much money as reasonably possible, and this is based on your income and your personal circumstances. It’s also important not to stress yourself out worrying about not saving enough money. Right now, you don’t have enough to accomplish all of your goals, and you probably won’t for a while. That’s okay. Just save as much as possible, and spend wisely.

Tax Planning Strategies

Tax planning is one of the most crucial areas in which you can save money and achieve your personal financial goals. That said, it can also be difficult. As with personal financial planning, it’s easy to shirk the duties necessary to get the most out of our taxes. You should be aiming at more than simply not having to pay more in fines due to not paying your taxes adequately. Here are some strategies to consider:

Reduce Your AGI (Adjusted Gross Income)

This doesn’t mean “making less money”. It means investing in a 401k. That, or a retirement plan that is similar to one. You can also reduce your AGI through income adjustments such as:

  • Tuition and fee deductions
  • Paid student loan interests
  • IRA contributions
  • Self employment health insurance
  • Moving expenses

Increase Your Withholding

While this does mean that more will be taken from your check in taxes throughout the year, it also means you may owe less money and get a bigger tax refund at the end of it.

Increase Your Deductions

There are many things that you can deduct from your taxes in order to save money. Many people overlook a lot of them. If you’re an independent contractor, you can deduct virtually any work-related expense, including gas mileage and items and online expenses that relate to your job.

Other things that can be deducted from your taxes include:

  • Charitable contributions
  • Investment related expenses
  • Tax preparation fees

It is important to keep track of all of these, and to file and organize all receipts relating to them, for when you file at the end of the tax year. It’s also a good idea to keep a spreadsheet where you record all of your deductions.

Tax Credits

These will reduce the amount of taxes you have to pay, and can include things like:

  • Lifetime Learning Credit
  • Hope Credit
  • Earned Income Credit
  • College expenses
  • Adopting children
  • Saving for retirement

How Poston Denney & Killpack Can Help

The experts at Poston Denney and Killpack have many years of experience helping people and businesses alike with their taxes and finances. They are dedicated to helping you get the most out of your money and your labor. They tailor their services specifically to the needs of each of their clients. When you choose Poston Denney & Killpack, you can expect competent advice and comprehensive financial planning strategies. They will sit down with you, go over all of the information they need, and begin constructing a plan that is perfectly tailored to your situation and your budget.

Financial planning isn’t easy. If it was, we’d all be far richer than we are now. Rather than worrying about your financial situation, take charge of it and reap the monetary rewards!