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Budgeting for the year’s big costs

By Kemberley Washington ·
Wednesday, February 26, 2014
Posted: 6 am ET

Remember your New Year’s resolution to budget more and spend less? If you have fallen off the wagon, don't despair.

Following are a few major expenses you are likely to face both this year and in the future. By preparing now to spend wisely later, you can get your budget back on track and keep it there for 2014 and beyond.

Tax time

Expecting a tax refund in 2014? Congratulations! Now, don't spend that refund frivolously. Set aside some money for an emergency fund, paying down debt or simply reaching a financial goal.

If you crunch the numbers on your return and find that you owe taxes to Uncle Sam, make sure the problem doesn't arise again next year. Adjust your tax withholding to ensure you are paying enough in taxes throughout the year.

Back to school

Are you or your dependents headed back to school this fall? If so, start putting money now into education saving plans such as a 529 plan or a Coverdell Education Savings Account.

These accounts help you save for school while offering tax advantages when you use the money for qualified educational expenses.

Putting money in the account now and taking it out this fall will net only a very modest tax savings. There is just not enough time for the money to build between now and autumn.

However, if you make contributions this year and give them a few years to grow, you will make a much bigger dent in your tax obligations in future years.

The holidays

Don't wait until the end of the year to save for the holidays. Delaying your saving will only cause you to rob Peter to pay Claus this Christmas.

Instead, start planning now for your Christmas spending. Set aside amounts as small as $50 per month from March to December and you will accumulate $500 for gift spending.

The holidays often detonate one of the year's biggest budget bombs. Keep yourself from plunging into debt by saving now for the holidays, and for other costs throughout the year.

Kemberley Washington is a certified public accountant and a professor at Dillard University in New Orleans. Follow her on Twitter: @kemwashcpa.

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