Organizing isn’t only about clutter and bins. It can also help you be calmly confident in your finances.
February is the shortest month but it’s also a good month to get organized in your finances because of tax season.
I wrote about records retention and getting your paperwork ready for tax filing here but there are other things you can simultaneously do to both stay organized and to build your wealth for the future.
Here are 5 financial organizing tasks to do in February as you prepare for tax filing.
1. Gather your tax documents and file early if it makes sense
Create a spreadsheet of all your accounts and check off each supporting document as it comes in. This will help you prepare for filling out forms.
For some, this means logging in to each financial account, finding the right tab on the website, and downloading relevant tax forms. Some people may receive paper statements. However you gather them, be orderly about it and focus on one at a time.
Tax season officially started on January 23 so early filers can see a refund as early as mid-February. But employers are not required to submit their copies of Form W-2, Wage and Tax statements until January 31. And if you have investment accounts, Form 1099s often come later. So many filers simply cannot file until February or later.
There are some benefits in filing as early as possible. If you are owed a refund, you’ll get it sooner. And if you owe, you have more time to save the payment due since it does not have to be paid until Tax Day (which in 2023 is Tuesday, April 18).
2. Review your withholding strategy
On the subject of refunds, many people want to get a large refund each year from the IRS.
I'd like to invite you to rethink that strategy.
A tax refund in practice is an interest-free loan to the federal government. While I am certain they appreciate it, that is money you could have been using yourself through the year.
On the other hand, withholding too little can mean a significant payment due in April.
The goal should be to reach the "Goldilocks" of tax withholding: not too much and not too little. Set up your paychecks so that enough money is being withheld each pay period that you won't owe at tax time and not so much that you give the IRS an interest free loan.
Consult a tax professional for advice.
3. Pull a copy of your credit report to check for fraud
This is a perfect time to check your credit score and to see if any work needs to be done to clear things up.
You are entitled to a free credit report once a year. Now is a good time to exercise that.
Once you receive yours, review it for any errors and contact the respective credit bureaus (Experian, Equifax, and TransUnion) to start the process to fix any errors that you find.
In doing this, I have personally found credit cards I did not open attached to my Social Security number, so I am militant about doing this annually.
You absolutely should do this once a year whether you use credit cards or not because it is the only sure way to know if someone has opened lines of credit or accounts in your name.
Work with the credit bureaus to clear your account if necessary. It is a process to clear up but it is worth it.
Consider whether immediate family members need this as well. For example, I pull reports for my two children and my husband pulls his as well.
4. Automate your savings
Financial issues weigh heavily on a lot of us and this lack of financial security also makes a lot of us vulnerable.
As of January 2022, 56% of Americans cannot cover a $1000 emergency with savings according to a survey completed by Bankrate. And that vulnerability can spell disaster should trouble strike.
A great way to start building wealth is to simply start saving. And a great way to start saving is to just put it on autopilot.
Automating your savings is a smart way to increase your savings. It easily separates savings from spending funds and helps you avoid spending money as soon as it arrives in your bank account.
Frankly it is surprising how fast it can grow if you simply leave it alone and add even small amounts regularly.
Either split your direct deposit to put some in savings or set up a recurring transfer from checking into savings. Either way your online banking system should have this option easily available.
5. Set up a budget
An American Psychological Association (APA) report showed that 57% of respondents said that having enough money to pay for things in the present, like rent and groceries, is their main source of financial stress.
The only way to alleviate that stress is to figure out how to pay for the things you need with the income you have coming in the door. And the only way to do that in an organized way is to budget.
"Budget" is kind of a bad word but I think it gets a bad rap. It really is a form of self-care.
Someone told me once that budgeting is not about stopping spending but rather about freedom to spend. In some ways I agree. Once you assign jobs to your dollars, you have that money to spend.
Then again, if you don't have enough dollars to cover expenses it causes stress.
The only way to alleviate that stress is to reduce spending - or increase income. Either way, it becomes clear only when you have a budget.
I'll share with you that we did not always budget. It took a massive household system failure to scare us into it. We refer to that failure as "SewageGate 2019". Suffice it to say it was very expensive, really disgusting, and a painful wake-up call to our vulnerability from debt.
We have since completely gotten out of debt (except our mortgage) and have changed our mindset.
Using a budget made the difference.
I want to spare you a SewageGate experience, dear readers!
Spending some time on these five tasks once per year can help reduce stress in your life and longer-term, set you up for financial success. They are just good practices.
Whether it’s anxiety over an emergency fund (or the lack thereof), shame about spending habits, or the burden of having to do mental math every time you pull out your debit card, the lack of control around personal finances is a significant stressor.
The goal of my company and this blog is to help you add peace to your life. So let me know questions you have around getting organized around your finances.
I am here to help.
When you're ready to tackle your tough organization project, I am here to help you learn how.
Let's RETHINK organization together.
For more information, visit the RETHINK website today.
Mandy Thomas is a professional organizer fulfilling her lifelong passion for creating order out of chaos. She finds joy in helping people tackle their most overwhelming spaces and collections to create the optimal living space and enjoy their homes.
RETHINK organization is on a mission to help you develop long-term patterns of organization that you can maintain and feel good about long after our work together is done.
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