If you act now, there are many things you can do to minimize your tax burden. Unfortunately, most individuals wait until the year is over to see a tax accountant.

First, decide whether you want to lower or raise your current year taxable income. Most will want to lower their current year taxable income because a dollar in tax savings today is worth more than a dollar saved next year. However, often new businesses will anticipate a lower marginal tax rate in the current year, which will outweigh the benefits of tax deferral.

Income. The timing of bonuses, recognition of capital gains from the sale of stocks, and exercise of non qualified stock options are all events that can easily be delayed into a subsequent year. Income can also be deferred through various qualified retirement plans or deferred compensation plans. Business owners have even greater flexibility to adjust their revenue through the timing of invoicing and negotiating the timing of large payments.

Deductions. Cash basis taxpayers can also defer their tax obligations by paying deductible expenses by December 31. Business owners can often deduct up to $108,000 in equipment purchases even if purchased on December 31. Other expenses that would otherwise be paid in the next year can generally be deducted if paid by December 31.

For individuals, the search for deductions will focus on itemized deductions. Taxpayers can accelerate the deduction of the portion of their mortgage interest accruing to January 1 by mailing the check in December. Likewise for property taxes. If you are planning on making a gift to charity in next year, consider paying it before December 31. Get extra tax savings by gifting long term appreciated stocks or other property. You can get a deduction based on the fair market value and avoid paying capital gain on the appreciation.

Your strategy for medical expenses and miscellaneous itemized deductions may be quite different. Medical expenses are only deductible to the extent they exceed 7.5 percent of adjusted gross income. Miscellaneous itemized deductions are only deductible to the extent they exceed 2 percent of your adjusted gross income. Because of this, you may want to adopt a bunching strategy.

For example, assume $100,000 adjusted gross income and $10,000 medical expenses in both year 1 and year 2. If you pay the medical expenses in the year incurred, you will have a $2,500 deduction each year, because only the portion exceeding $7,500 (7.5 percent of adjusted gross income) is deductible. Your total deduction for both years is $5,000 (($10,000 – $7,500) x 2).

If instead, you delay paying all your medical expenses until year 2, (your Doctor will understand), your total deduction for both years is $12,500 (i.e. $20,000 – $7,500). By bunching your expenses in one year, more of the expenses are deductible because your don’t have to meet the $7,500 threshold twice.

Estimated Tax Payments. One way to minimize your tax burden is to minimize your penalties for failure to pay sufficient estimated tax payments. Often, individuals starting new businesses get into tax trouble because they no longer are making withholding payments, since they quit their job, and they are incurring a new self employment tax up to 15.3 percent. Even if they make a sufficient tax payment on January 15th, they will likely still end up with a penalty because the IRS wants them to make even payments throughout the year. The answer may lie in increasing federal withholding on your spouses income or on your income as an employee of your own business. Payments made through withholding from your paycheck are treated as paid equally throughout the year. This allows you to make up for underpaid estimated tax payments retroactively.

A good budget is made to last throughout the years. Yes, you can budget in the short term to get through troubled times, but the best budgets will take you out of trouble and to your goals. Budgeting is essential in planning for your future.

There are ways you can make your budget easier to commit to. The number on thing to remember throughout the budgeting process is that a budget is not a fixed document. It has to be flexible, as your spending changes over time. It is a guideline, but detours do happen.

Start with a budget that fits your family’s situation and spending habits. The key is having money left over, not where you are spending money. Don’t follow someone’s percentages as to how much you should be spending on groceries or gasoline. Your budget must fit your family. It is necessary to accurately list your income and expenses. Don’t round things up or down. Don’t smudge on how much of your income goes to taxes. Don’t leave things out. Be honest, or it won’t work. Never budget for a future income, budget for right now. You need to include enough categories so that you know where your money is going. However, too many people go to extremes in details. You don’t need to necessarily track every single category, you can lump some together. For example, my family budget includes a free spending category. This can be anything from clothing (we don’t purchase a lot of clothing) to a night out on the town. You have to include things that don’t happen monthly, such as your auto insurance, homeowner’s insurance, property taxes and yearly leases. Make sure that you are putting these amounts in an account for when they come due. This will save your budget when you get the bills for yearly expenses. You won’t be left scrabling. This is just as important as having an emergency account for auto maintenance and other repairs. You need to regularly review your budget to determine that you have enough categories and are budgeting enough for each category. You should also look for ways to cut your spending in your categories. Some things you can consider a challenge. Aim to cut your grocery bill by $40 next month. Look for ways to save. They are there. Make sure that you track how much cash you are spending. Keep receipts if necessary — this is usually easier than writing things down as you spend them. If you aren’t good at tracking, give yourself an allowance of cash. This is all you have to spend. We do this as we are awful at tracking our spending. But we never overspend on our cash limit for the month. We know what can and can’t come out of our checking, so it protects our budget. In fact, most people respect cash more than checking, so they will actually be stingier with their cash reserves. Budget your savings as a bill that must be paid. I recommend having it automatically withdrawn from your checking each month. That way, there is no way to avoid paying your savings. It is already gone. You won’t spend it thinking you’ll put a little extra in next month. The most important bill you have to pay is your future. Have realistic goals. Budgeting isn’t about tracking money, it is about meeting financial goals. It allows you to save for your future, for your kids’ college, for vacations and other things you want to do in your life. Without these goals, there is no reason for a budget and it will fail. You need to see how you spend your money by looking at your budget. Most people are amazed at how much they are spending in various areas. You need to be able to look at your budget and see exactly what can or needs to be changed. You can always cut costs and save more. Challenge yourself. The top thing is keeping your eye on the goal and remaining positive. Your attitude will make your budget work. Don’t look at your budget as something holding you back. Look at it as a way to find money for your future. A budget can definitely make your life much easier. But you have to stick with it.

Years ago family budgeting was so simple. People were paid in cash bi-weekly. We took the cash and made up envelopes with totals on the outside of all our bi-weekly or monthly expenses. We just filled the envelopes and what was left over went into our “Savings” envelope. That was a laugh as most paydays only left about $2 in savings but at least we knew all our expenses were taken care of.

As things evolved what with inflation we realized one day that we were keeping to much cash in our home. So we deposited our income into the bank. To keep track of our budget we bought a ledger book with lots of columns. We made up a column for each envelope writing the total amount needed for that expense across the top row.

Each payday we added the new total to whatever was left in each individual column. When a bill was paid we subtracted from the column’s total. All the column headers must total the expected income. If the income varied we made adjustments to the “Savings” column. Some expenses are only due once a year such is the case with property taxes. That expense was divided by 12 and each month it grew.

When starting a new budget it is important to take into account that for example your property taxes may be due in 6 months so you would be short come time to pay them. To rectify this one needs to make a one time only adjustment and double up the payment to that column just until you make your payment and then you can reduce the payment to that account to 12 equal payments. All your column totals should equal your bank balance.

If the total expenses are divided equally by 24 paydays a year those of you that are paid bi-weekly will find that there are 2 months that you receive 3 paychecks. This becomes your bonanza! All that is needed from those extra 2 paychecks is your grocery and gas money. Whatever is left over can go into your “Savings” column. Doing this twice a year gave us Christmas savings from one and holiday savings from the other.

You will also find you are maintaining a nice cash flow in your bank account. How nice when an unexpected expense comes along to be able to borrow from yourself rather than using your credit card and paying interest. Just be sure to make a payback adjustment to that column.

One day I realized I was doing all this work while I knew I had helpful resources on my computer. I now use the Excel program for our budget and it does the math automatically.

If you use this budget system you will often find your bank balance says you have more money than you actually have. But you know what is allocated to expenses. So while the bank tells you there is so many dollars left in your account you know they are spoken for and therefore know how much you can spend on those extras. We often think we have cash left on payday for a dinner out or a new pair of shoes but by using a budget system it may tell you that is not so for this payday. In the long run choosing to run a budget is a very helpful solution when trying to save money!