The turkeys have been eaten and the trees are starting to go up. Christmas is right around the corner. While we’re all looking forward to one of the most magical holidays of the year, that also means that the new year is right around of the corner. Pretty soon, we’ll be making our new year’s resolutions.
As you think about your goals for the coming year, it’s also important to reflect back on the year past and wrap any any loose ends, especially when it comes to your finances. Here is a checklist of five financial things you should do before new year’s day:
Review Your Yearly Budget
The end of the year is the perfect time to review your yearly budget. Are you on-track? Did you overspend? Did you have to dip into your emergency fund? While it may be too late to make a change now, reviewing your spending will help you make your new budget in the coming year. If you’re over, you might have to cut back the first few months of the new year.
Max Out Your Retirement Contributions
You should take a look at your retirement accounts immediately. For an individual retirement account (IRA), you have until you file your tax return in April of next year to make a contribution. However, for a 401k, you have to make your contribution in the same calendar year for it to be deductible.
Donate to a Charity
Many people choose to donate to charity during the holiday season. This is not only a way to give back to the community but also a deduction on your tax return. You must make your charitable contributions by December 31st and they must be itemized if you are claiming these contributions as a tax deduction. Don’t wait until the last day either. Aside from the fact that the last few days may not be a business day, certain donations, like donating stocks for example, may take a few days to process.
David’s Note: Consider donating appreciated stocks to a donor advised fund and then request the fund to liquidate the stocks and send the amount to your charity. This way, you get to deduct the amount of the stock in the year it was sent to the donor advised fund without you paying capital gains taxes and the charity gets the money you were going to gift anyway.
Spend What’s Left in Your FSA
The policy on funds left in Flexible Spending Accounts (FSAs) have changed over the years. In the past, you had to spend everything before the year end. Otherwise, you would lose it. Now, employers can offer to rollover up to $610 or offer a grace period. However, your employer must agree to it. Make sure you understand your company’s policy so that you don’t end up losing money you could’ve spent.
Prepare for The New Year
Lastly, as the year ends, it’s never too early to start preparing for the upcoming year. Gather financial documents you’ll need and make sure everything is up to date, especially if you’ve have a life change recently. Something as simple as making sure your address is updated can save you a lot of headaches later now. I moved a few years ago to my current home and we still get mail from the last owners. They never even updated their address on their driver’s license with the DMV. They recently told me there’s someone trying to steal their daughter’s identity by opening credit cards in her name. I’m not saying that they wouldn’t have had their identity stolen if they were more on top of things, but keeping your information up to date is always safer.
What is one financial thing you are planning to do before the new year?
Editor’s Note: I’ve begun tracking my assets through Personal Capital. I’m only using the free service so far and I no longer have to log into all the different accounts just to pull the numbers. And with a single screen showing all my assets, it’s much easier to figure out when I need to rebalance or where I stand on the path to financial independence.
They developed this pretty nifty 401K Fee Analyzer that will show you whether you are paying too much in fees, as well as an Investment Checkup tool to help determine whether your asset allocation fits your risk profile. The platform literally takes a few minutes to sign up and it’s free to use by following this link here. For those trying to build wealth, Personal Capital is worth a look.