YOUR MONEY
You Could Retire at 55: Start Planning Now
Top 10 habits for financial success
Your grandfather didn't leave you the family's substantial oil fortune? Never mind. Starting smart savings, investment, and tax prep habits now can help you grow your own fortune.
1. Take charge of your own money - Once you have a good sense of your budget, your income, and your debt, you can set savings and investment goals with confidence - and you will be able to stick to them. Take a look at your bank accounts, credit cards, mortgage, and other debt, focus on your spending habits, and set a budget - including saving.
2. Keep clear records - Developing a simple, fail-safe method for organizing business-related receipts is a lot easier than chasing them down every April: try a simple desktop card organizer, or use an electronic organizing system such as H&R Block DeductionPro ®.
3. Save for retirement - Start now, even if it's just $20 a month into an IRA. Setting up good habits as early as possible matters more than the amount does in the long run. Saving for the future can have immediate benefits in tax savings, as well. Also, take advantage of your employer's retirement plan, even if you save only the minimum amount allowed.
4. Review W-4 withholding regularly - Depending on your goals, W-4 withholding can increase your cash flow during the year and either reduce the amount you owe, or boost your refund at tax time. Be sure your withholding reflects what you need to avoid getting a nasty surprise come April.
5. Prepare and file taxes electronically - Whether you do it yourself or rely on H&R Block's online or software solutions, preparing and filing electronically cuts tax preparation time, speeds your refund and lessens the likelihood of an error. While 20 percent of paper returns contain errors, .05 percent of electronic returns do.
6. Pay off credit cards - Better yet, never keep a balance on them in the first place. Credit card debt is not only the most expensive debt you have, it can hurt your buying power when considering large purchases such as homes or land.
7. Consider buying a home - Home ownership not only turns the money you're spending on rent into an investment, but it has extremely beneficial tax advantages as well - especially in the first few years of ownership.
8. Start saving for your children's education - In 15 to 20 years, it will take an estimated $170,000 to $230,000 to finance your child's college tuition and living expenses, depending on the type of school they choose to attend. So get started now - even a small regular contribution to an education savings plan will grow and compound dramatically over time. Some of these plans have tax benefits, as well.
9. Claim education credits - Several important credits and deductions can help defray the cost of higher education. Don't forget to track higher educational expenses for everyone in the family - not only the kids.
10. Deduct Student Loan Interest - Provided you qualify, the tax law allows you to deduct (up to $2,500 per tax return, per year) the interest paid on any loan used exclusively to pay for education expenses for yourself, your spouse or children. Depending on your situation, this could add up to a lot of tax savings.