The year-end financial moves you make now before 2017 is history, can save you money and set you up for success next year. Some tasks are as simple as organizing your records, receipts, and bills. Others involve proactive measures to reduce your 2017 tax bite. The most important thing is to have a strategy and not procrastinate.
Make Your Financial Future a Priority
While writing your New Year’s resolutions, be sure that first on your list is a strategy for realizing your financial goals. Take an honest look at your financial health and identify what you can do better.
- Is it debt reduction? How will you get there?
- Do you want to go back to school? How much money will you need?
- Maybe you are ready to buy a home? How much do you have saved?
- Your credit score is keeping you from favorable financing options? How will you improve it?
Here are 5 year-end financial moves to make now that can save you some money this year and get you on the right track for the year ahead.
Leverage Your Savings
- Max out your college 529 savings account.
A 529 saving account is the perfect way to save for your children’s college education. As you know, you can put away as much as $14,000 annually, per child. Contributions are not limited to you either. For each child, you and other relatives can contribute the maximum allocation, without gift tax penalties. Plans do vary, however, as to the upper limit a single child can have. Be sure to coordinate with the account custodian to avoid mistakes.
- Use up the Balance in Your Health Care FSA
Funding a health care flexible savings account (FSA) is the best way to ease the financial shock of those uncovered medical expenses. You can save as much as $2,600, pre-tax, each year. This means you also save on your tax bill. You can use your FSA to pay for eligible out-of-pocket medical expenses, such as deductibles, orthodontics, eyeglasses, and such. However, unless you snag a two-month extension from your employer, you must use up any balance in your FSA by the end of the year. Among your year-end financial moves should be taking care of all those medical needs you have been pushing off.
- Retirement and Emergency Savings
How is the balance in your retirement accounts? According to a Federal Reserve report, Americans are woefully behind in the amount of money they save for emergencies. In fact, the report says that not even half of American households can cover a $400 emergency bill. Your emergency savings account should cover a minimum of between three and four months of your basic living expenses. Take a look at the balance now. If you fall short of this, put everything you can into your emergency fund now. Even if you are focusing on debt reduction, put as much money as you can into an emergency savings account.
The same goes for retirement savings. Max out on the allowable contributions to your Roth IRA or employer matched 401(k). Not only will you be saving for your retirement, but you will also save money on your taxes.
Cut Your Financial Waste
- Membership and Subscription Fees
Conduct an inventory of your various membership and subscription services. For instance, did you actually use your fitness center membership this year? Was it enough times to make it worth the membership fee? If not, cancel. How many Netflix movies and programs did you watch? The same with all other membership accounts, such as warehouse stores, entertainment venue packages, Amazon Prime, Spotify, etc. If you did not use them, cancel. Take this money and put it toward debt reduction and/or savings.
The Congress has just passed a sweeping tax reform package. We need a few more days before we know all the changes and the impact on individual taxpayers. But among your year-end financial moves should be anything that will help reduce your tax burden. For instance, postponing income. If you have a side hustle you can easily do this by asking your customers to pay you next year. If you can afford it, accelerate your state and local tax payments. There will be a major change to this category in the new tax bill. Here is another year-end financial move to make:
Max out on the allowable donation deduction by distributing to your favorite charities now. The year-end period is better for them too, as they often receive matching donations at this time of the year. Be sure to obtain receipts for all of your charitable gifts. This is a great time to organize any receipts you have for charitable contributions you made during the year. By the way, if you are short on cash right now, you can still make a 2017 charitable contribution. You can pledge the full amount now, use your credit card and pay the contribution next year.