With New Years only days away, there is still time to make some smart end of the year money moves to set you up well in the new year.
Here are some steps you can take to get your finances on track before 2019:
1. End of the Year Money Moves – Prepare for Tax Season
Tax season probably isn’t on your mind much yet, but now is the perfect time to save yourself some money come April. Here’s a quick checklist of what you can get done by Dec. 31 to save money:
- Donate to charity
- Contribute to pre-tax accounts like a Health Savings Account (HSA) or 401(k)
- Sell your losses
- Pay estimated tax on any big bonuses or buyouts
It’s also a good idea to try to estimate your tax bill now so you’re not caught off guard at tax time. Keep in mind that your bill might look very different due to the new tax laws that went into effect this year.
2. Max Out Your Retirement Accounts
Like I mentioned above, you can contribute to certain retirement accounts up to Dec. 31st. Maxing out your 401(k) will help you save money on your tax bill while padding your retirement account. This is a smart way to use your year-end bonus, too.
3. Check on Withholdings and Beneficiaries
Take this opportunity to look over your benefits, withholdings and beneficiaries before the new year is in full swing. Don’t forget to account for major life changes like the birth of a child, a marriage or a divorce. Pay attention to who is listed on retirement accounts and insurance policies.
4. Give to Charity
If you plan to give to charity during the holiday season, don’t forget to keep track of what you’ve donated. Anything you give by December 31st may be tax deductible.
See my guide for how to fit giving into your budget and lifestyle.
5. Rebalance Your Portfolio
A good rule of thumb is to check over your portfolio once per year. Checking it too often can lead to unhelpful knee-jerk reactions, and not looking it over enough can lead to missed opportunities. An annual check-in gives you the chance to rebalance your portfolio so it aligns with your goals for the upcoming year.
Check it over to make sure you’re comfortable with the current level of risk, and that you’re not hoarding money in any one asset.
6. Do Tax Loss Harvesting
After you’ve looked over your portfolio, you might want to consider selling the investments that are now worth less than they were when you bought them.
This is called tax loss harvesting, and it is typically worth a tax write off of about $3,000 per year against your income. Just be aware you won’t be able to buy back your investments immediately because of wash sale rules.
7. Reflect and Make a Plan
Resolutions usually fail because they’re too broad and don’t spell out the details of how you’ll achieve them. Look back at this year and see what went well or what didn’t pan out. What goals do you hope to achieve this year? Ditch the approaches that did not work last year, and try something new this time around.
One of my top tips for goal setting is to set SMART goals. If you haven’t heard of this before, it means setting goals that are (s)pecific, (m)easurable, (a)ction-oriented, (r)ealistic and bound by (t)ime.
These goals work because they come with a plan of attack.
When you’re looking at what you achieved this year and where you hope to be one year from now, don’t forget to pay attention to what went well and what is working for you now. Not only will that help you feel more grateful and excited for what you have now, but it will give you clues to the types of goals you have achieved, and how you got to that place.
About Your Richest Life
At Your Richest Life, Katie Brewer, CFP®, believes you too should have access to financial resources and fee-only financial planning. For more information on the services offered, contact Katie today.