If you have let your finances fall into disarray and have been putting off the task of cleaning them up, then there is no better time than January to begin getting your financial house in order. Here are five things that you can do this coming year to get back on track financially and make the most of your money. (For more, read Starting Early With Financial Planning.)

TUTORIAL: Retirement Planning

Make a Budget
There are many programs and resources that can help you do this effectively, such as www.mint.com, Quicken and Microsoft Money. Websites and computer programs can usually provide more realistic and effective budgets than written ones due to being better able to factor in non-periodic payments and one-time expenses, while also providing reminders for upcoming expenses and warnings if you are exceeding your budget. Many of these programs also allow you to link all of your other accounts, such as retirement and banking, to this program, so that they can provide a continual moving snapshot of your entire financial picture on a daily basis.

Adjust Your Tax Withholding
If you received an income tax refund of more than $1,000 last year and your income and expenses are likely to be materially the same this year, then it's probably time to fill out a new W-4 form with a higher number of allowances than you listed before. If your refund was for several thousand dollars, then you should probably increase this number by at least two or three for both federal and state withholding. It does not make sense to loan hundreds or thousands of dollars each month to the tax collectors at 0% interest. (For related reading, see Filing Your First Tax Return.)

Dump Your Losers
This may be the time to finally get rid of the stock that you bought five years ago at 45 cents a share that is now trading for a penny a share. None of the company's new products have caused the stock to rise to $10 a share like they promised it would, so you might as well cut your losses and liquidate this holding. Then you can declare a capital loss on the sale and either net it against any taxable investment gains or else deduct $3,000 worth of your loss each year until it is fully written off.

Refinance Your Home
Interest rates are at historic lows. If you haven't gotten around to refinancing your house and plan to continue living in it for a while longer, then this is the time to have your house appraised and get your paperwork together. Although refinancing can be a bureaucratic hassle in some respects, it can save you a bundle over time and allow you to contribute the difference to your retirement savings, or pay down other debt.

Protect Yourself
Lastly, you should create an emergency savings fund and get your estate plan in order, if you haven't done so already, to ensure that you and your family are always protected.

The Bottom Line
Whether you're looking to save a little more for retirement or just trying to get back on track, consider these options to improve your financial well-being in the New Year. (To learn more, see Financial Planning: It's About More Than Money.)

Related Articles
  1. Personal Finance

    How Tech Can Help with 3 Behavioral Finance Biases

    Even if you’re a finance or statistics expert, you’re not immune to common decision-making mistakes that can negatively impact your finances.
  2. Taxes

    How & Where to File Form 1040 (And Which Version)

    All taxpayers need to know three things when filing a 1040: which form to use, how to file and where to file. After reading this, you'll know all three.
  3. Savings

    Should You Look at 529 Plans Outside Your State?

    529 savings plans are not restricted by geography. So if your in-state offering has high fees or poor investment choices, look elsewhere.
  4. Taxes

    5 States Without Sales Tax

    Learn about the five states that do not charge sales taxes and about other taxes the states levy instead in order to generate revenue.
  5. Investing Basics

    How to Deduct Your Stock Losses

    Held onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
  6. Taxes

    10 Money-Saving Year-End Tax Tips

    Getting organized well before the deadline will curb your frustration and your tax liability.
  7. Taxes

    2016 Tax Code Changes Add Some Wiggle Room

    It's never too early to prepare for tax season. Next year features a host of tax law changes. Check our handy list to see which ones apply to you.
  8. Savings

    These 10 Habits Will Help You Reach Financial Freedom

    Learn 10 key habits for achieving financial freedom, including smart budgeting, staying abreast of new tax deductions and the importance of proper maintenance.
  9. Taxes

    End-of-the-Year Checklist to Save on Income Taxes

    From grouping related expenses to factoring in the alternative minimum tax, here are some things you need to keep in mind when doing tax planning.
  10. Insurance

    Avoid the Obamacare No-Insurance Penalty by Jan. 31

    If you don't have health insurance, act NOW or you could owe penalties on your 2016 taxes, in addition to this year's.
  1. Are personal loans tax deductible?

    Interest paid on personal loans is not tax deductible. If you take out a loan to buy a car for personal use or to cover other ... Read Full Answer >>
  2. Is homeowners’ insurance tax deductible?

    While your fire or homeowners' insurance premiums may be included in your property payments, they are nondeductible expenses, ... Read Full Answer >>
  3. Are mutual fund expense ratios tax deductible?

    The short answer to whether mutual fund expense ratios are tax deductible is "No," but the long answer, however, is more ... Read Full Answer >>
  4. Can the IRS withhold your tax refund?

    If you have any outstanding federal tax or state income tax debts, the IRS may levy any federal tax refunds or state income ... Read Full Answer >>
  5. Are shares of stock escheatable?

    Some investors are surprised to learn financial assets such as shares of stock can be escheated, or seized by the state. ... Read Full Answer >>
  6. Are stock accounts escheatable?

    Many states consider stock accounts to be escheatable property. After stock accounts have posted no activity, typically at ... Read Full Answer >>

You May Also Like

Trading Center