Financial Literacy 101: What You Need to Know

inancial literacy is the know-how to manage your money and plan for your financial future. If you’re not entirely comfortable with money or aren’t sure you have all the skills to manage it properly, don’t worry! It’s never too late to add financial skills to your portfolio. 

Seventeen Years of Promoting Financial Literacy

In 2004, Congress established April as National Financial Literacy Month to highlight its importance and to help teach Americans to establish and maintain healthy financial habits.

The Council for Economic Education, a key sponsor of the initiative, explains that financial illiteracy persists because of the complexity of our global economy.

This also bleeds into personal finances, with members of Generations X, Y and Z struggling to understand or recognize the implications of revolving credit card debt. CreditDonkey notes that they have the highest rate of revolving credit card usage, with 36 to 37 percent of them keeping a balance on their cards every month.

A Wealth of Knowledge

Possessing the ability to manage money is an essential skill to achieve not only economic security but also financial well-being. And yet, financial literacy is not part of many school curriculums, and most Americans struggle to create a budget, save and make healthy financial decisions throughout their lifetime. When you become financially literate, you put yourself in a better position to achieve financial freedom.

While it may seem daunting at first, learning some basic financial planning and money-management skills is the first step toward achieving long-term financial well-being.

Financial Literacy Month is a great time to learn how you can become more money wise. From bank accounts to buying a home, here’s a primer on personal finance and exactly what you need to know: 

  • Make a monthly budget
  • Shop smarter
  • Maximize credit card benefits
  • Improve your credit (and why that’s important)
  • Develop the discipline needed to achieve financial security


Based on a 2019 FDIC study, 95% of U.S. households have a bank account. Based on this data, it’s fair to assume you already know the importance of keeping your money in the bank. But, do you know the difference between checking and savings accounts, and how you should use each?

Checking Accounts

A checking account allows you to write checks and use a debit card for purchases. Both leave a paper trail of your spending in a way that using cash does not. This ability to track, manage and analyze your spending is a key part of achieving financial well-being and financial literacy. 

Savings Accounts

A savings account allows you to set money aside for big ticket items, an emergency fund or other short-term savings goals. The money in savings accounts may earn interest and usually does not have check writing or an ATM debit card attached, but can be linked to your checking account for easy transfers in both directions.

Things to Consider When Shopping for a Bank

When shopping for the best bank for your needs, be mindful of fees. Banking fees may include:

  • Overdraft
  • Monthly account maintenance
  • ATM withdrawal 

Search for banks offering a free checking account, ATM fee reimbursement and free transfers from your savings account as overdraft protection. Some banks may also offer a 24-hour grace period for overdrafts, as well as no fees if the overdrawn amount is below a certain threshold. One tenet of financial literacy is not paying fees for basic services that competing banks offer for free. Do your homework and bank smarter. 


Having a budget means that you know how much money you have coming in and going out each month. Budgeting is essential to reaching your financial goals. If you don’t have a current budget or never tried to make one, Financial Literacy Month is the perfect time to learn how to budget

Open a spreadsheet on your laptop or download the You Need A Budget app on your phone, iPad, Apple Watch or even Alexa-enabled device (such as an Amazon Echo), and start inputting numbers such as your paycheck amount, car payment, etc. 

A successful budget will:

  • Start with how much money you bring home each month.
  • Help you set money aside to save.
  • List all of the fixed bills you need to pay.
  • List all of the variable expenses you incur each month. 
  • Show you how much money you have to spend on fun extras like eating out, going to the movies or the newest streaming service, etc.

Start with Savings

For many people, savings is the last line item on their budget, something possible only if any money is leftover. As you think about the money you have coming in and going out each month, consider making the amount you save a top priority. By putting savings first, you can then adjust your spending accordingly, which may help you rein in discretionary spending. 

Additionally, using an app like Chime can help invigorate your savings by automatically moving spare change from your purchases into a savings account. Also, when you choose to have your paycheck directly deposited into a Chime account, you’ll be able to set up a rule to move a percentage of your pay into your savings on a recurring basis.

Of course, Chime isn’t the only app you might consider. Others include:

All of these tools can help you establish the discipline to save money.

Variable vs. Fixed Expenses

Everyone has a set of fixed monthly expenses, including:

  • Housing costs (mortgage or rent)
  • Utility bills like electricity, water and sewer, home internet (amounts may vary but the frequency is fixed)
  • Cell phones
  • Car payments
  • Loan payments

These expenses tend to be roughly the same amount each month, and should be the first items on your monthly budget after the amount you want to save. 

Variable expenses also include regular costs of living, but unlike fixed expenses, the amounts can vary wildly month to month. These include, but are not limited to:

  • Weekly trips to the grocery store
  • Eating out
  • Entertainment costs (movies, concerts, theater and sporting events)

Variable expenses are often what cause people to break their budget. 

Good Money Habits

The most financially literate people tend to have good money habits. These are usually small acts that help to not only save money on what you buy but also help you see monetary value in putting in extra work to do things for yourself at home. Examples of good money habits include:

  • Using coupons at the grocery store
  • Buying items only when on sale
  • Searching for cash-back options and online coupon codes before making purchases
  • Making coffee and tea at home, and brown-bagging meals at work
  • Being aware of ways to save money when living on a tight budget

Forming good money habits can be the difference between meeting your monthly financial obligations and overspending. 

A Daily Financial Check-Up

Another good money habit many financially savvy people share is the daily routine of a quick financial check-up. It takes just a few moments to log on to your bank and credit card accounts every day and update the balances in your budget. By paying close attention to your money, you will have all the information you need to make smarter financial decisions.

Living Within Your Means

One example of financial literacy and having good money habits is understanding how to live within your means and why that’s important. In doing so, you will not spend more than you earn.

Spending Money

From groceries to cars, spending money is a part of everyday life. While spending is not bad, per se, some money is better spent than others. Let’s take a look at how you might be spending money to see the benefits and risks involved.

Credit vs. Debit

The way in which you spend money matters. Using a debit card is a way to ensure that you live within your means because the money comes directly from your checking account. Credit cards, on the other hand, offer spending flexibility and often come with bonuses, but there is risk of accruing debt; therefore, the need for discipline is critical. It’s important to understand the differences, benefits and risks of using credit and debit cards. 

Credit Cards

Credit cards are issued by banks or other financial institutions and work like a loan. When you make a purchase using a credit card, the issuing bank is lending you the money to pay for it. Like any other loan, you will be charged interest for the privilege of borrowing money. However, there are ways to use credit wisely to establish a positive credit history and score, and reap additional benefits offered by credit cards while mitigating the risks involved.

Before accepting that credit card offer you received in the mail, it’s important you understand the following credit card terminology:

Credit Limit

This is the maximum amount of credit you can use for purchases at any one time. When approved, you will be assigned a credit limit. This amount can increase over time as you make your credit card payments on time. As you make payments, you free up more of your credit limit to use again for additional purchases.

Grace Period

Most credit card companies offer a grace period for your new purchases. If you pay off your balance on time every month, you won’t be charged interest. If you do carry a balance from month to month, however, you will see interest accrued on your credit card balance. 

Annual Percentage Rate (APR)

When you apply to borrow money through a car loan, mortgage or a credit card, you will see the term annual percentage rate (APR). 

The APR on a credit card refers to the interest applied to your account. Your credit card’s annual percentage rate will likely only be a factor on balances you do not pay off within the grace period (often upward of a month after the closing of a billing cycle). However, APR can also apply to interest on charges or transactions including:

  • Cash advances
  • Balance transfers
  • Late payments

It’s important for you to know how APR works, how it might impact your budget and how good money habits can help you avoid paying credit card interest.

Introductory Interest Rates

Credit cards often offer low or no interest offers to entice new applications. These introductory periods can be beneficial if you’re planning to make a large purchase right away. But, keep in mind that interest is accruing even if you’re not being charged it. This means that if you fail to pay off the card balance in full by the end of the special interest rate offer period, you will be subject to paying the balance under the normal, usually higher, interest rate.


Some credit cards have annual fees. These fees range from $69 to upward of $299 per year and are charged regardless of whether you use the card. Unless you are receiving substantial rewards from the credit card (free checked bags with an airline, complimentary nights at a hotel each year, etc.), you should avoid cards with annual fees. 

Minimum Payments

When your credit card statement period closes each month, you’ll see the total amount due and a minimum payment. To avoid a late fee, you are required to pay at least that minimum amount. However, paying only the minimum payment amount each month could see your credit card balance rise and enter a cycle of debt that may be difficult to escape from.

Credit Card Benefits

For all the risks involved with using credit cards, there can be a number of benefits, such as cashback bonuses, airline miles, gas station rebates and more. To take full advantage of these benefits, you must have the discipline to use credit cards judiciously to avoid interest and living beyond your means.

Using credit cards wisely could have additional benefits for you, including helping you establish a good credit history and credit score, as well as a healthy credit utilization rate (one factor in being approved for future borrowing). 

Credit Card Risks

Credit cards are revolving debt, meaning that when you make purchases using a card, you are borrowing money. As with any loan, you’ll need to pay the money back. Financial literacy is understanding how credit cards work and the risks involved. Financial responsibility, however, is achieved when you live within your means and manage your credit card usage and debt wisely.

Debit Cards

When you use your debit card for purchases or to access cash from an ATM, you are only spending money you already have in your bank account. If you don’t have enough in the checking account attached to your debit card, there are several possible outcomes depending on your bank:

  • The purchase is declined.
  • The purchase is processed with the additional money pulled from your savings (if your bank offers complimentary overdraft protection and your two accounts are linked). 
  • The purchase is processed but your account goes into a negative balance, at which point you will either be charged an overdraft fee or given a certain amount of time to bring your account positive before being charged a fee.

Good Debt vs. Bad Debt

Not all debt is bad. For example, the debt you take on from financing a new car or buying a home are signs of personal growth. And assuming you can afford the payments, both examples of good debt likely have fixed monthly payments and a knowable payoff date. They are also positives on a credit report, as they demonstrate your creditworthiness and credit history. 

Debt accumulated on credit cards and loans from living beyond your means is problematic. This kind of debt compounds due to interest and fees, and can add stress to your life. Achieving financial literacy will help you see the signs of trouble and avoid bad debt situations going forward. 

Credit Score

Your credit score is a 3-digit number representing your financial track record. Ranging from 300 to 850, it allows banks and other financial institutions to quickly determine the risk they undertake in lending you money. Having good credit can help you receive financing — and at a lower interest rate — when buying a car and applying for a mortgage loan.

There are several steps you can start to take today to improve your credit score, including:

  • Monitoring your credit report (apps like Credit Karma allow you to monitor for free)
  • Improving your credit utilization rate by increasing your card limits
  • Paying down your debt
  • Using credit cards less often
  • Consolidating your outstanding high-interest debt
  • Making your payments on time

To further your financial literacy journey, read our in-depth post on improving your credit.

Investing for Your Future

We’ve already talked about saving for tomorrow’s needs and preparing for the next emergency with a rainy day savings account, but it’s also important to invest for your future. Saving for retirement is essential to reach the point where you no longer need to work. 

You can start saving for retirement at any age by contributing to an employer’s 401(k), if one is offered, and/or an IRA (Individual Retirement Account). Setting money aside for your retirement, typically on a pre-tax basis, can help lower your taxable income in the present and allow you to someday stop working and enjoy your later years without worrying about earning an income. 

Personal Responsibility

While not exclusively a financial literacy topic, exhibiting personal responsibility is a big part of having a healthy relationship with money. It’s up to you to take the necessary steps to spend wisely, make and stick to a budget, and save money to achieve your financial goals throughout your life. 

Financial Literacy Is Within Your Reach

Financial literacy may seem like an unattainable goal, but it is within your reach. By working to understand these topics one at a time over the course of financial literacy month, you can improve your relationship with money and put yourself on a course for financial stability and well-being. 

Read more: Better Money Habits: 9 Steps to Developing a Positive Money Mindset

What the Extended Tax Deadline Means for You

In mid-March, the Internal Revenue Service (IRS) announced an extended tax deadline for 2020 tax year filings. You may be wondering, why was the tax deadline extended? The answer will likely not come as a surprise.

The IRS delayed the familiar April 15 fed tax deadline in part because of changes to the taxation of unemployment income received in 2020. Additionally, the IRS “wanted to do everything possible to help taxpayers navigate the unusual circumstances related to the pandemic.”

To help you understand what these changes mean for you, we’ve answered your top questions about the extended tax deadline.

What Is the New Federal Tax Extension Deadline?

The federal income tax filing due date for individuals for the 2020 tax year is now May 17, 2021. There are, however, caveats to the federal tax extension deadline.

Do I Need to File An Extension?

The tax date extended automatically to May 17, 2021, meaning you do not need to file any forms or call the IRS to receive this one-month extension. Nothing further is needed to take advantage of the elongated tax filing period to prepare and file your 2020 taxes.

Is Tax Day Extended For Businesses?

No. The extended tax deadline of May 17, 2021, applies only to individual taxpayers. For freelancers and self-employed Americans, however, it’s important to note that tax day was extended for those paying tax on self-employment income. Consult a tax professional to discuss your specific self-employed and business tax filing status. 

What If I Need Tax Day Extended Beyond May 17?

The IRS allows taxpayers to apply for a federal tax deadline extension, and this year is no different. If you need additional time to file beyond the new May 17 deadline, you are able to request an extension until October 15 by filing Form 4868 through your tax professional, tax software like TurboTax or by using the Free File link at 

This IRS Form gives taxpayers extra time to file their 2020 tax return. It’s important to note that this extended tax date does not stretch the due date to pay your taxes. If you will owe 2020 federal income tax, you should still plan to pay it by the new federal tax extension deadline of May 17, 2021, to avoid paying interest and penalties. Consult a tax advisor for more information.

Are My Quarterly Estimated Tax Payments Extended Too?

Quarterly income tax is generally due to be paid by individuals who receive money that’s not subject to income tax withholding and/or do not have federal income tax withheld automatically. This money may include, but is not limited to:

  • Self-employment income
  • Interest
  • Dividends
  • Alimony
  • Rental income

The new May 17, 2021, fed tax deadline doesn’t apply to any estimated quarterly tax payments you may be making throughout the year. Those are still due on April 15, 2021. 

Is the Tax Deadline Extended Further for February Winter Storm Disaster Relief?

Yes. The IRS issued a special extended tax deadline for taxpayers in Louisiana, Oklahoma and Texas. These are the states where FEMA declared a disaster in reaction to the winter storms in February. In these three states, the new deadline for filing individual and business tax returns, and making tax payments this year, is now June 15, 2021.

Do I Have More Time to Make IRA Contributions for the 2020 Tax Year?

When the IRS extended the tax deadline, it allowed individuals more time to make 2020 contributions to:

  • Individual retirement arrangements (IRAs and Roth IRAs)
  • Health savings accounts (HSAs)
  • Archer medical savings accounts (Archer MSAs)
  • Coverdell education savings accounts (Coverdell ESAs)

You also have until May 17 to take advantage of the possible tax benefits of making contributions to these accounts. 

Furthermore, May 17, 2021, is the new due date for reporting and paying the 10% tax penalty due on early distributions from IRAs, 401(k)s or other employer-sponsored retirement plans in 2020.

Does The Extended Tax Date Apply to State Taxes?

While May 17, 2021 is the new federal tax deadline, the extension does not apply to the state tax filing deadlines in 42 states (plus Washington D.C.) 

To avoid state tax penalties, it’s crucial that you check with your individual state to see when your tax filing deadline is this year.

None of the information provided above is intended to be tax advice. Please consult an attorney or tax advisor.

Read more: 11 Ideas for What to Do with Your Tax Refund This Year

11 Ideas for What to Do with Your Tax Refund This Year

It’s a tax season like no other. Given all that’s going on in the world, it’s understandable that for many folks, priorities have shifted. This year’s tax refunds will likely be greeted with exhausted enthusiasm. But what should you do with your tax return to get the most out of your refund this year?

While the average refund decreased by 11.4% from 2019 to 2020, Americans still received, on average, a refund of over $2,500, according to the IRS. If you’re expecting a tax refund this year, you may be inclined to put that money to use in different ways than in previous years. Let’s take a look at what to do with your tax refund to enhance both your financial and emotional well-being.

Used correctly, your tax refund can help you accomplish a number of goals simultaneously. Ideally, you’ll add to, replenish or start a savings account to prepare for the next emergency, as well as plan for your future and take care of yourself and your loved ones. You can also use your tax refund to pay off debt, start a business and even set some money aside to make a difference in your community. 

Here are 11 of the best ways to use your tax refund this year:

1. Pay Off Debt

If you have outstanding high-interest debt on credit cards, payday loans or other bills, paying those off (or at least down considerably) may be the very best way to use your tax refund. Start with your highest interest debt and pay it down as much as possible. If you can pay it off in full, that’s even better. If not, consider a debt consolidation loan with a lower interest rate to pay off high-interest debt. Once paid off, consider closing that high-interest credit card in favor of one with a more favorable interest rate. 

Choosing to use a tax refund to pay off debt could give you more financial freedom month-to-month, save you money immediately (by not paying as much interest) and relieve stress. 

2. Put Your Tax Return Toward Creating an Emergency Fund

One of the best ways to use a tax refund is to ensure that your future is more secure. If you have a savings account, add to it. If you don’t, use your tax refund to start one! 

Of all the lessons we learned in 2020, having an emergency fund that can help you and your family in the event of unexpected financial struggles, job changes or a global pandemic is one of the most important to heed. 

As you decide how to use your tax refund, be careful not to let the bulk of it sit too long in your checking account, as it’ll likely start to dwindle as you adjust your spending upward with all that extra money easily accessible. 

3. Pay for Home Improvements or Car Repairs

Repairing or remodeling your home isn’t simply about trying to increase its value. Enjoying where you live is critical for your emotional well-being and happiness. Renovating your home, even in small ways, can increase the quality of your life and make you a happier person every day. Not to mention, there are a lot of affordable home renovations that can help you save money over the long run, such as installing more efficient appliances or windows. You might even find some good tax season deals. Just be careful: Big sales can lead to impulse buys if you’re not careful. 

But homes are likely not the only thing in your life that need a little maintenance. If you’ve been ignoring that check engine light and putting off automotive repairs, consider spending some of your refund on fixing your ride this year. Doing so might save you a lot of money down the road.

4. Donate Some of Your Tax Refund to Charity

There are probably a few causes that you wish you could financially support throughout the year but cannot while juggling a mortgage, internet and phone bills, and the rest of your monthly living expenses. And your favorite charity could probably use your support this year more than ever. 

If you’re getting a refund, tax season is one time you can make your wish come true. Donating money doesn’t just help you for next tax season (most charitable giving is tax deductible). It can help your community in the moment and, in turn, give you a sense of fulfillment that’s impossible to put a price tag on.

5. Treat Yourself with Your Tax Refund

It may seem frivolous to spend money from your tax refund on a special treat, but treating yourself to something nice doesn’t necessarily mean you’ve fallen victim to the dreaded ‘impulse buy.’ For example, after the year we’ve had, planning a vacation once it’s safe to take one could do a world of good for your well-being. 

When you think about what to do with your tax return this year, consider finding different ways to practice self-care with anything from a deep tissue massage to cooking lessons, a new fishing rod to that dream vacation.

6. Save for Retirement

The money from your tax refund could go a long way toward bringing your retirement into focus. There are a few ways to use your tax return to save for retirement and, in turn, potentially help with your tax situation next year:

  • Depositing money in an IRA at your bank
  • Investing in a traditional or Roth IRA through a trusted financial services firm (IRA contribution limits have been set at $6,000 for 2021)
  • Setting some of your refund aside in your bank account to offset an increase in your 401(k) contribution

7. Invest in Yourself

One of the best ways to use a tax refund could be to invest in yourself through a professional degree course, gaining new technical skills or even enrolling in graduate school. And doing so may have future tax benefits of its own through the Lifetime Learning Credit! 

According to the IRS, “this credit can help pay for undergraduate, graduate and professional degree courses — including courses to acquire or improve job skills.” Additionally, this credit is worth up to $2,000 per tax return and there’s no limit on the number of years you can claim it.

8. Invest in Your Children

The cost of going to college shows little sign of decreasing, so why not use some of the money from your tax refund to start a 529 College Savings Plan for your children if you have any? Like traditional retirement plans, the earnings in a 529 plan grow tax deferred (meaning that while you can’t deduct your contribution on your federal taxes, you won’t have to pay taxes on your withdrawal to pay their college tuition years from now). 

This useful nest egg may help your child start their academic and professional life with less debt on the path to getting their diploma. However, keep in mind that if you don’t anticipate the funds in your 529 plan covering your child’s entire tuition, it may impact their ability to secure financial aid. As always, do your homework and consult a financial advisor with questions.

9. Start a Business

Whether you’ve been longing to turn your hobby into a side hustle by starting your crafty business on Etsy or need seed money to finally open your dream breakfast café in your hometown, the money from your tax refund could go a long way toward starting a new business. 

10. Buy a Life Insurance Plan

The sticker shock of life insurance plans can be jarring. If buying life insurance has been cost prohibitive in the past or your employer doesn’t offer it, spending some of your tax return this year to secure your family’s future could be one of the wisest decisions of your life. 

11. Take Care of Your Mental Health

Finally, if you’ve been wanting to try therapy but couldn’t afford it because therapy is not covered by your health insurance, put your tax refund to work to improve your mental health this year. When all is said and done, this may end up being the very best way to use your tax refund. 

Read more: Learn how financially savvy people put their tax refund to work

Filing Taxes: What You Need to Know Before Tax Season

It’s that time of year! To help you prepare ahead of filing taxes this tax season, we’ll discuss:

  • What documents and information to gather
  • Why you might want to consider last-minute deductions
  • The best time to file depending on whether you’re expecting a refund versus owing additional tax

Keep in mind that for specific questions or concerns about filing taxes, it’s best to consult a trusted tax professional. 

Decide Who Will File Your Taxes

How complicated do you expect your tax situation to be? Did you have a major change last year, like a divorce or marriage? Or did you start a business, cash out a 401(k) or have a child? If so, you may need professional help filing your taxes. That’s why it’s always best to know early on whether you’ll need a pro. (Keep in mind that their prices could rise closer to the April 15 tax filing deadline.) 

The Internal Revenue Service reports that more than 80 million taxpayers used paid professionals to complete and submit their tax returns last year. If you plan to go this route, it’s important to organize your receipts, forms and other documents well before tax time. 

You May Be Able to File Your Taxes for Free

If your tax situation doesn’t require a professional this tax filing season, you may want to look into IRS Free File. This public-private partnership between the IRS and the tax preparation software industry provides brand-name tax filing products for free to many Americans, which means you could prepare and file your federal income tax online for free.

Gather Documents

Now is the time to gather up: 

  • W2s
  • 1099 forms
  • Donation receipts
  • Calculated childcare costs
  • Medical bills paid out of pocket
  • Investment interest tax forms
  • Property tax receipts
  • Student loan interest payments
  • Anything else related to your financial life from the past calendar year 

You or your tax professional may not need it all, but being armed with more is better than less when it comes to tax filing. 

Compile Personal Information

Chances are you have your own Social Security number memorized. Whether you file taxes electronically yourself or with the help of a tax professional, you’ll need to have your spouse’s Social Security number if filing taxes jointly, and those of the dependents you’ll claim as well. 

Additionally, you may need addresses, dates, and dollar amounts of vacation and rental properties if you bought or sold them last year. Now’s the time to pull together and write down all of this information to make tax filing season seamless. 

Have a Copy of Last Year’s Return on Hand

Cross-referencing this year’s return with your last can be helpful in making sure you don’t forget something, like a deduction you’re still eligible for or a source of passive income you need to claim. 

Consider Last-Minute Retirement Plan Contributions

The 2020 IRA contribution limit was $6,000 plus $1,000 in catch-up contributions for those 50 and older. If you have extra savings and haven’t maxed out your retirement plan contribution yet, you may be able to reduce your taxable income to pay less tax this year.

Be Mindful of Tax Scams

One thing you need to know before filing taxes is that there are many tax scams out there to be mindful of, including tax preparers promising to deliver a bigger return. Remember that you sign your returns under penalties of perjury. Even if you work with a tax professional, it is you who’s responsible for any incorrect or misleading information, whether it’s a mistake or fraud. Make sure the person preparing your taxes is well-credentialed to reduce your risk. Additionally, you should never respond to telephone calls or emails claiming to be from the IRS or the U.S. Treasury. The only way the IRS will correspond with you is through the U.S. Mail, meaning that those phone calls and emails are not on the level.

Need More Time?

If you need an extension this tax filing season, you can submit a request by April 15, 2021, or your particular tax deadline. You can push your due date out up to six months. And you won’t be alone in doing so, either. Last year, 12 million Americans needed more time for filing their taxes.

Make a Plan for Your Refund

If you expect to receive a tax refund, make a plan for what you’ll do with that money so that you make the most of it. Will you put some away in savings, pay off credit card debt or give to charity? What you do with your refund is up to you, but it’s best to have a plan before your tax refund arrives in your bank account.

File Your Taxes

Of course, all of your diligent tax season preparations should culminate with the filing of your taxes on time, so mark your calendar!

Read more: Is HELOC Interest Tax Deductible?

11 Financial New Year’s Resolutions for 2021

As you make your annual commitment to start eating better and working out more, consider tackling your financial wellness, too, with these 11 financial New Year’s resolutions. From spending and budgeting to saving and learning, each of the new year money resolutions below could go a long way in improving your financial wellbeing in 2021 and for years to come.

1. Start Saving/Increase Retirement Savings

If you aren’t currently saving for retirement, the new year is the perfect time to start. Your employer may offer a 401(k) or 403(b)(7) retirement savings plan. They may even match your savings up to a certain percentage. If so, make a plan to contribute at least that percentage to maximize your company’s matching benefit and supercharge your savings. 

If you already contribute to your employer’s retirement plan or an IRA, consider bumping up the percentage you save to accelerate your retirement savings potential in the new year. Times may be tough right now, but there are ways to plan for your retirement even during an uncertain economy.

2. Make a Monthly Budget

Of all the top New Year’s resolutions, few have the potential to make as immediate an impact on your financial life as making a monthly budget. Actually seeing how much money you have coming and going, and what’s left to save for your short and long-term future, can be transformational. 

3. Build a Post-COVID Emergency Fund

If there’s one thing we’ve learned from the past year’s pandemic, it’s to expect the unexpected. That’s why one of our top New Year’s resolutions for 2021 is to rebuild our emergency fund for life’s “what ifs”. If you’re in a position to do so, start building your fund now by putting money aside every paycheck. Even a small emergency fund could help cover costs like grocery or electricity bills if you hit a bump down the road.

4. Consolidate Debt

Having a lot of debt to manage can drain your energy and negatively impact your mental health. As you think about which money resolutions may be right for you in the new year, consider debt consolidation to organize your outstanding debt. Debt consolidation could help bundle credit cards, medical bills, and student loans into a single monthly payment.

5. Refinance Your Mortgage

Mortgage interest rates are still holding at or near all-time lows. A refinance could be one financial New Year’s resolution that’ll leave more money in your bank account. That means more money to build your emergency or retirement funds. FYI: You may also be able to refinance your auto loan to reduce your car payment.

6. Improve Your Home

You may not need to go as far as replacing your siding or building a new patio to feel better about your home. There are plenty of smaller home repairs and upgrades that can freshen up your space. Consider replacing light fixtures inside or planting a new garden bed outside to make a notable difference. Whether looking to increase the value of your home, make money-saving home repairs in the winter or simply enjoy your home, the benefits of home improvements are boundless.

7. Improve Your Credit

Make 2021 the year you improve your credit with these six tips to improve your credit score. You can start by paying down credit card balances while requesting credit limit increases. This is not so you can spend more, but rather reduce the usage rate of your credit cards, which may help boost your score.

8. Become a Couponer

Make a New Year money resolution to stop spending unnecessary cash and get rewarded for your everyday buying habits. Traditional coupon clipping and online cashback and discount services like Rakuten are a great place to start.

9. Analyze Your Media Consumption Spending

For years, people wished they could choose their television channels a la carte versus spending on a bloated monthly cable package. That day did eventually arrive, but are we actually saving money? This new year, spend some time analyzing your watching habits and streaming subscriptions. Cancel any subscriptions you rarely use or ask friends or family to share an account.

10. Analyze Your Investments

If you have stocks, bonds, and mutual fund investments, take time early in the new year to analyze your portfolio’s allocation. Generally speaking, you should want less risk in your portfolio as you get closer to retirement. If you’re nearing retirement or plan to withdraw your savings soon, you might need to tweak your allocation to minimize risk. 

11. Become Smarter About Money and Finance

We love talking about money and personal finance, but we understand that not everyone feels the same. Thankfully, there are other ways to learn about money. Podcasts are a great way to boost your knowledge about the economy, personal finance, and other money-related topics. Check out Planet Money, The Indicator and So Money for fresh, topical, and conversational money chats without the confusing industry jargon.

Read more: 5 Tips to Pay off Debt in the New Year

What Are the Tax Benefits of Donating to Charity?

‘Tis the season of giving, and with that, you might be wondering about the tax benefits of donating to charity. As American historian, author, and social justice advocate Mary Ritter Beard said, “The results of philanthropy are always beyond calculation.”

Philanthropy is key to living a fulfilling life, not only because of the possible tax benefits of donating to charity. Sure, tax deductions could lower your tax bill, but being charitable does so much more than just help you. It serves your entire community.

There are countless ways to give back to others. You can donate money or goods to a non-profit organization in your town, helping to improve it. You might make a financial contribution to an organization researching disease treatments. You could also support civil rights non-profits fighting to make the world safer. Whether it’s kids, vets, seniors, animals, institutions or the environment, there’s no wrong way to give back.

Of course, during financially tough times, it’s hard to justify giving money away. Yet, there’s a strong case to be made for making charitable giving a routine part of your life. Let’s explore how you might benefit financially and emotionally from giving back.

What Are the Tax Benefits of Donating to Charity?

You should consult a tax accountant to fully understand the tax benefits of donating to charity. Generally speaking, though, you could expect to deduct donations against your income tax. Keep in mind, you have to itemize to take a charitable deduction. If you do itemize your deductions, make sure your total individual deductions are greater than the standard deduction.

Four Ways to Receive the Tax Benefits of Donating to Charity

Not everyone has the means to donate large amounts of cash. But, there are countless other ways you can give back and reap the tax benefits of donating to charity.

1. Make a Small Recurring Donation

No amount is too small to make a difference. Consider setting up an automatic, recurring donation to a cause that’s close to your heart.  You won’t miss that $5 or $10 each week, and you’ll feel good knowing that you’re doing good.

2. Donate Unwanted Clothes and Goods

Goodwill and the Salvation Army accept donations of clothes, toys, furniture and more. Non-profits like these sell your old items in their stores to fund community programs. For example, Goodwill funds job training and placement services for people who struggle to find traditional employment.  Simply make a fair estimate of your donated goods’ value, ask for a receipt, and keep it handy for tax time. Find a Goodwill location near you.

3. Donate an Old Car

Did you know that you may be able to donate your old car and receive the tax benefits of donating to charity? It could even be more beneficial financially than selling your car for cash or trading it in. Organizations like Kars4Kids, Cars Helping Veterans and the Make-A-Wish Foundation all accept cars as a 100% tax deductible donation.

4. Donate In-Kind Capital Gains

According to the mutual fund powerhouse and investing thought leader Vanguard, “When you donate appreciated assets to a 501(c)(3) public charity, you don’t incur the capital gains tax. Just make sure you donate those assets in kind rather than selling them first.” If you expect capital gains from your investments, consult a tax accountant before making any donation decisions. 

Three Other Benefits of Donating to Charity

1. Boost Your Mood

Knowing that you’re responsible for helping others can be like serotonin for the soul. This is especially true when giving to smaller local organizations and people in your own community. This way, you can see and feel how your contributions have helped those around you.

2. Be the Change

Gandhi said, “Be the change you wish to see in the world.” It may sound cliche, but by making even small donations, you have the opportunity to do just that. You might even inspire your kids, friends, and family to do the same. Being the philanthropic ripple that creates waves is a worthy life goal.

3. Improve Your Community

You might start giving back because of the tax benefits of donating to charity, but soon you’ll find that philanthropy is a win-win.

Your charitable donations could give your community the support it needs to thrive. You might help restore an historic building, allow disadvantaged kids to take part in life-changing arts programs, or revitalize a local park.

Melinda Gates, who donates millions every year, says, “Philanthropy is not about the money. It’s about using whatever resources you have at your fingertips and applying them to improving the world.” You don’t need millions to make a real difference. You, too, can help your community and people across the globe with your cash, cars, investments and household items. The best part is the immense joy that comes with giving, even more so than the tax benefits of donating to charity.

Read more: Jumpstart Your Financial Well-Being