2016 is almost here, and with a new year comes time for reflection about what went well — and what you’d like to improve for next year. Maybe you had a great year and followed your 2015 financial plan carefully. Maybe you didn’t make a plan and want to get on track.
No matter where you fall, everyone can benefit from a solid financial plan as we move into 2016. Creating one now will set you up for success in the months to come.
Create a Savings Plan for 2016
To financially prepare for 2016, you’ll want to create a list of savings goals in the upcoming year. You may have a financial goal of saving up for a down payment on a house, or expanding your emergency fund to last six months or more. Perhaps you want to travel more or grow your family.
No matter what you want to save up for, it’s important to list out your goals for 2016 so you can determine how much you need to save. From there, you can make an action plan for achieving your goals.
For example, if you’d like to have $5,000 saved in your emergency fund by June 2016, you have 6 months to save. This means you’ll need to save just over $800 a month to reach that $5,000 target. Once you have a solid number in mind, you can break things down to see what actions you need to take each month to achieve what’s important to you.
Max Out Your Retirement Accounts in 2016
In 2016, the contribution limit for 401(k)s, 403(b)s, most 457 plans and the federal government’s Thrift Savings Plan will continue to remain at $18,000, as will the IRA contribution limit of $5,500. This means if you’ve maxed out your retirement accounts in 2015, you have a solid financial plan to stick with in 2016.
If you haven’t maxed out your retirement accounts this year, you now know how much you will need to save per month in order to max out your accounts by the end of 2016. For most of the above retirement plans, you’ll need to save $1,500 per month to max out one account by December 2016. Maxing out your IRA will be a little easier at roughly $450 a month to have it maxed out by December 2016.
Depending on your financial plan and goals, you may choose to max out your IRA first, as it’s easier to max out $5,500 in one year than $18,000. But keep in mind that some employers offer what amounts to free money in the form of a 401(k) match — and that 401(k)s and other retirement accounts are tax-deferred.
Talk with your financial planner to determine what accounts you should focus on first, and how you can make the most of tax-advantaged accounts so you can optimize your savings.
Prepare for Taxes
April 2016 isn’t too far away! If you expect to see an increase in your income in 2016 (from a raise, a promotion, or a side job), you may want to discuss your savings and investing options with a financial planner or CPA.
A good CPA will help you determine if there are deductions you qualify for that you may have been unaware of in order to help you save as much as possible on your 2015 tax bill, and can help you determine if you should itemize your deductions or stick with the standard deduction.
They may recommend you work with a financial planner to determine better investing options that can make your tax situation more favorable, as well.
Getting financially prepared for 2016 will ensure that your new year is bright, as you’ll understand your finances and be set with a plan right away. By determining a savings goal, making a plan for maxing out retirement accounts, and considering taxes now, you’re less likely to stress throughout 2016 and wonder if you’re on the right track financially.
Instead, you can focus on other resolutions and goals. You know you have a solid financial plan for 2016.