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Yearly tax optimisation – short post

“End of Year happened before we realized: We didn’t leverage all tax benefits we could. Plan and schedule ahead and make it automatic”

2017 is over and here we are in 2018. That sure went fast! We have definitely enjoyed 2017 and made plenty of blunders that we could learn from. One of them is what to do at the end of the year to help us on our path to financial independence.

We were so busy enjoying the holiday period with our family, that we just didn’t think that we had any options to improve our financial position. We wouldn’t sacrifice any time that we had together as a family, but we could have planned and setup automated tasks at any point during the year to make it easier for ourselves.

Here are some of the mistakes we made and how we will make it easier going forward. 5 steps are presented to optimize your annual tax.

  1. Learn how you can automate tasks with your banking partner, either using their internet banking portal or visit them and ask them. By planning ahead, you will also not create any excuses to prevent you from shifting your financial resources to the appropriate accounts.
  2. Know the tax system of your country. Either educate yourself with books and website, or hire a professional.  It might take some time when you start, and you will have to update your knowledge every time there are any changes, but it will definitely benefit you.
  3. Talk to your HR business partner at your work, there may be benefits you can utilize that you are not aware of. Combining this with step 2, will help you be prepared to maximize your gross income for the full year.
  4. Tax optimize your investments. This step will depend on the country you live in and it’s regulations. There may be benefits to sell investments that are a loss and use the loss to tax equalize other income you may have. Use step 2 when reviewing this step.
  5. Lastly, there are tax deferred saving and pension accounts that allow you to deposit funds until December 31st of that calendar year. The tax you pay on these accounts are less than your normal income tax. Utilize these accounts to defer taxes to a more preferred moment in the future.

If we review these steps and see how effective we have been in 2017, we had done all steps except for step 1. We knew which tax deferred accounts we would be able to leverage. We knew which investments to sell off to maximize the tax benefit. We had spoken to our HR business partner and tax consultant to understand our specific situation and plan for it. Our biggest blunder was that we had not automated any of it.

Imagine, you are on a sunny beach with you family. Enjoying the beach, sea, weather, food and games. We forgot about tax optimisation the very moment we focussed on the most precious and important aspect of our life, our family.
If we would have scheduled the actions in our banking internet portal, it would have happened while we were enjoying the family. We have learned from our mistakes and have started automating the tax optimisation strategy that has been designed for 2018. We hope you will do the same!