8 Smart Money Moves to Make Before the End of the Year

Have you started planning your holiday festivities yet? With the arrival of November, it seems like many people are ready to jump head-first into the holiday season.

But the last few months of the year shouldn’t only be used to make Thanksgiving dinner and hang Christmas lights. You should also consider making some smart money moves to further solidify your financial future.

Do you want to know what we’re talking about? Keep reading to discover 8 smart financial steps you should make before the year is up.

1. Evaluate Your Budget

Most households have a budget, but when was the last time you actually looked at it?

Pull that budget out and see how you did all year. Did you meet your savings goals? Did you budget for more money than was needed in one area?

Looking at this at the end of the year is a great first step in making sure you’re on the right track with your spending and saving habits.

2. Tweak You Budget for Next Year

Of course, your budget may not be working for you. If you notice you have excess money in one area and broke your budget in another, don’t be afraid to tweak it.

If you’re still working, you may not think much of your budget– “I’m making enough to pay my bills and save a little, so that’s all that should matter.”

But once you retire, you’ll be on a fixed income. It’ll be important to know where your money is going to ensure your social security and retirement savings last as long as you planned.

3. Make an Extra Retirement Contribution

Having a good retirement account is one of the most important parts of planning for the future. If you make contributions every month, you may not think to do anything extra at the end of the year.

However, the more money you can contribute, the better. So, consider planning to make at least one extra contribution before the end of the year.

This also has an added bonus. The money you put into a 401(k) isn’t taxed, so you’ll be able to reduce your earned income and may get a nice tax break.

You won’t be able to take advantage of a tax break if you have a Roth IRA, but your money will grow tax-free and won’t be taxed upon withdrawing it during retirement. So, it’s still smart to make that extra contribution.

4. Convert Retirement Funds to a Roth IRA

Do you have both a traditional and Roth IRA account? Now is a great time to move some money from your traditional IRA into your Roth IRA. Why you ask?

Well, when you retire and withdraw money from your traditional IRA, it will be taxed. This increases your taxable income and could mean you’ll have a higher tax rate for your IRA, capital gains, and Social Security.

But money in a Roth IRA isn’t taxed when you withdraw it–it’s taxed when you contribute or convert money into it from another IRA. So while you’ll have to pay taxes on it now, you could avoid that higher tax rate when you retire.

With this strategy it’s crucial to get with your tax advisor to make sure that paying the tax now on the conversion makes sense.  If your taxes are going to be especially low this year from unique financial events in your life, it could be a great opportunity for you.

5. Harvest Capital Losses

How have your investments done this year? If you notice you suffered some losses, there is one way you can make those losses hurt a little less.

Harvesting your capital losses (selling investments you lost money on) is a great way to decrease your income tax bill. This can also help to cancel out increases in your taxes due to capital gains.

6. Rebalance Investments

Alright, so now we’ve looked at your retirement accounts and any extra investments you may have. But we’re not done yet!

You should consider rebalancing your investments before the end of the year. The value of your investments is constantly changing, so that investment you made last year may not make sense to keep for next year.

Of course, choosing the right stocks, bonds, and other investments can be difficult. Don’t be afraid to consult with a financial planner before making any changes.

7. Review Your Documents

Nobody likes to think about the worst, but it’s an important step in securing your future as well as your family’s future.

If you haven’t done so already, create a will and a living will. But, what’s the difference? Well, simply put, a will dictates who gets your assets after your passing while a living will dictates your end-of-life medical care in the event you cannot communicate it yourself.

Additionally, you’ll want to appoint a financial power of attorney. This is someone who will take care of your finances in the event you are unable to do it yourself.

A medical power of attorney should also be appointed. They will be responsible for making your medical decisions if you are unable to. Both your financial and medical power of attorney must be someone you trust, but they don’t have to be the same person.

The last major document you should look at is your life insurance policy. Review it and decide if any changes in the policy or beneficiaries should be made.

8. Use FSA Money

If you have a medical FSA, you should take a look at your account balance before the end of the year.

Many accounts have a “use it or lose it” policy. So, if you don’t use any remaining money by the end of the calendar year, it’ll be gone. This is a great time to get your eyes checked, go to the dentist, or have an annual checkup, so you can use up the rest of your money.

Of course, some plans have a grace period or will allow you to keep $500 in your account for next year. So, make sure you know the rules before you act.

Don’t Wait–Make These Money Moves Now

Don’t let the holidays take up all your time at the end of the year. Make sure you make these smart money moves before you ring in the new year.

Do you need help figuring out your investments, taxes, or insurance needs? Contact us today to learn more about our services.