Review Your First Quarter Finances

Tip #287 - Review Your First Quarter Finances. It is that time of year again (actually a couple weeks past!) when we should probably look over how we are doing with this year's finances. But, if you haven't done your taxes yet, do that first! Once those are signed and sent, sit down with your budget, spreadsheet, notebook, calculator, or other financial tools you use to figure out your finances. If you are serious about getting your finances in order and motivated to put away money or pay off debt then you should have set some financial goals and written a budget at the beginning of this year. Our first-quarter review is basically just a review of how we are doing with those goals and how successful we are with the budget that we set for ourselves.

If one of the goals you set for yourself was to accelerate your payments on a car loan of $3500 and be finished with it by year's end then look up your statement online (or in the mail) and see how much you have paid off from January 1 until now. If you have paid off close to $1000 of it, then it looks like you are on your way to reaching your goal. If you have not done any accelerating of payments thus far, then analyze why that is the case. Did you have unexpected expenses? Have you been putting it off, hoping to pay more of it off later in the year? Have you spent any money needlessly that could have been applied to this loan? Is this goal still realistic? If you find that you are slacking then look over your goals again and why you want to achieve them to help find the motivation to get back on track. If you find that you grossly underestimated another expense in your budget, and you won't be able to pay off $3500 this year on your car, then adjust the goal to what you now think is realistic.

Look over your budget and compare it to you actual expenses that you have incurred over the past three months. Did you perhaps underestimate how much gas prices would rise? Do you need to raise the budget for that category? Find another category that you perhaps overbudgeted for, and take the money from that category. Have you found that you have been doing such a good job with cooking from scratch that you feel justified in lowering your food budget? Look over your categories again and analyze if you are doing all you can do to keep your expenses as low as possible. This is especially important if you are trying to build up some savings or get out of debt. Can you put your gym membership on hold for a few months while the weather is nicer? Can you take public transportation for cheaper than gasoline fill-ups?

This quarterly review is not necessarily a time to do a whole budget or financial goals overhaul. Instead it is just a point in time to review what you have done thus far in the year to see if you are headed in the direction and at the same pace that you plan, financially. It may be a time to make some small adjustments as mentioned above or perhaps a big change if things have changed drastically since you set your financial goals and budget (new job, sudden new addition to the household, etc.) But overall, it should be a time to just review how you are doing financially 1/4 of the way into the year.

In Real Life (IRL) - I did my taxes later than normal this year (just finished them last weekend!), so I have yet to sit down and do my quarterly review that I am pretty faithful about doing. I hope to find some time this weekend to do so, however. Part of what I do each quarter is look over our budget - and I do think I may need to up our gasoline budget as I did not anticipate the approximately 50-cent increase per gallon that we've had since the beginning of the year. With my husband driving 50 miles round-trip to work each day, that works out to about an extra $20-$25 per month in gasoline for which I didn't account.

I don't usually change our financial goals but I look them over and see if we are on track to reach them or if I am putting things off. Our mortgage is our only debt, so our goals involve putting $2,000 per year into each of our children's college account and $5,000 into each of our Roth IRA accounts. Pretty much come rain or shine, this is the minimum of what I want to do. Rather than change that goal, I would likely find ways to come up with the money (by selling more on eBay or taking one less vacation).

So rather than look at my goals to change them, I calculate my net worth each quarter to see where we are - how much we have in our retirement account, how much is in each of the kids' college funds, how much we have left to pay on the mortgage, etc. I like to use it as a basis of comparison with last quarter's net worth or last year's net worth. It gives me an overall picture of how far our financial goals are taking us. For example, my daughter turned 9 at the end of last year. With her late birthday, she wont' be started college till 2020. I can look at our net worth statement and see that at this time last year we had approximately $21K in her account. Then I can look at our current net worth and see that she has $23K in her account. By looking at our net worth, I can start to use this information as part of an analysis of our long term goals, which will be a topic for another post.

For now, I am going to gather our statements and check out how well we are doing against our budget. I know we are behind on making our deposits into our Education Savings Accounts and Roth IRAs, but that seems to be par for the course for us lately, seeing as I just made part of our 2010 IRA deposits a month ago (you have until April 18 to do so this year!) I hope everyone can make time for an early-in-the-year financial review. I find the process to be very worthwhile.

Organize Your Papers for This Year's Taxes

Tip #286 - Organize Your Papers for This Year's Taxes. Every year when January 1 or so rolls around, we start to think about our taxes. We begin to get envelopes in the mail on a regular basis that say "Important Tax Return Document Enclosed." And we start a pile of our tax documents. Then around February 1, the more ambitious of us start working on our taxes. And as we progress, we start searching for that little slip of paper the neighborhood trumpet player left with us that says we donated $10 to the high school band. And we start looking in our checkbook for all the checks we wrote to little Sadie's preschool. And inevitably at some point as we work on our taxes we have a nagging suspicion that we donated a desk chair to a local charity but never got a receipt for it, and we are suddenly making phone calls to organizations asking for slips of paper or lost statements. At least some of us are.

But why? It is so easy to start a folder or envelope for next year's taxes that everything tax-related gets put into as it comes in. It does not have to be sophisticated - a folder will do but something with sides like an envelope is better, so there is less chance of a small piece of paper falling out. Write on it "2011's Taxes" in big letters and keep it in an accessible place. What should go in it? Of course, each person's tax situation is different. And those who itemize their deductions would need to keep more receipts. Things that may need to be included are:

--Any donation slips you receive for donating material goods
--Any receipts you receive for donating money to charity
--Copies of your statement or checks that show you paid childcare
--Receipt of payments made to higher education
--Copies of medical payments not covered by insurance
--Travel expense receipts or a log of mileage for work you did for charity
--Receipts for home improvements that may qualify for energy-saving deductions

If you keep these all together throughout the year, it will be much easier when you sit down at tax time to do your taxes (or even if you hand over your paperwork to a tax preparer). The best time to get organized is as soon as you finish last year's taxes when tax paperwork is fresh on your mind. So if you have just finished your taxes or are about to sit down to do them this weekend, get a folder or envelope together for this year's taxes and start collecting the necessary paperwork.

In Real Life (IRL) - Organization is not one of my strong points. I tend to "keep things in my head" such as dates, activities, and such. And while I do pretty well with that system, my memory is nowhere near perfect, and I have forgotten several things from time to time. When it comes to taxes, a paper trail is more important than using one's memory, especially if it comes to getting audited. Fortunately, I have a husband who tends to be more paper organized and keeps all of our donations slips together. But there are other activities that my husband is not involved in so much (like writing checks to the kids' preschools) that I must take the lead in being in charge of.

Once I started selling enough on eBay to call it a business and declare my income I have had to be much more stringent on keeping all of my receipts and price records of what I purchase. Forgetting about trips to a yardsale or not keeping receipts from a thrift store only makes my job more difficult when it's tax time and causes me to miss out on legitimate business expenses. Having said that I am still not perfect when it comes to keeping track of all my personal charitable donations - the one I make in haste online for a friend of a friend or keeping track of my expenses that I have while working with a charity.

When I sat down to do my taxes this year, I found myself having to look up statements online to see if in fact I did make a donation to my college this year as I thought I had (I did, but misremembered the amount). And while I was looking up the statements I found another donation I made that I had completely forgotten about. Then I had to call the bank to have them send me old copies of statements that were not available online. Because of my lack of organization of paperwork, I had almost lost out on some decent tax deductions.

Also, if I had just kept track of my donations and expenses more thoroughly in the first place, I would have saved myself a lot of time and extra work. So for 2011's taxes, I have already set up a folder, and I am starting to add in receipts and log expenses in a notebook that I will keep inside so next year, my work at tax time will be much easier and more accurate.

How about you? Are you good at keeping papers organized for your taxes? Or do you wait until April to gather everything together and do some last-minute scrambling?