The end of the year is a busy time with lots of holidays, get-togethers with family and friends and year-end work deadlines. It can be easy to forget to make some time to review your financial situation and make sure you’re on track this year and you’ve got the right plan in place for reaching your personal financial goals in the coming year.
What Steps Should I Take Now? There are several different financial moves you should consider before ringing in the New Year.
- Take a good look at your budget. Now is the time to review your budget in detail. Are you meeting your savings or debt reduction goals? Are you spending more than you make? Is there a big expense coming up in the next year or so? If your budget isn’t synching up with your income, look for places to lower your expenses. If you’ve got more money than expected or receive a year-end work bonus, consider paying down any debts or increasing the amount you’re saving.
- Review your retirement plan. Whether you have an individual plan or are part of a plan at work, take some time to review your investments and make sure they’re performing well and your savings are on target for when you plan to retire. If retirement is coming up in the near future, it may be time to rebalance your investments to minimize your risk. If you’re just starting out, consider increasing your plan contribution while your expenses are lower.
- Check your flexible savings account balances. If you have a flexible savings account (FSA) to help pay for dependent care or health care, you should file all your claims before the end of the year. For some accounts, you lose any money you don’t spend on eligible expenses before the end of the plan year. Ask your employer or plan administrator to find out if you need to spend down your FSA before the year ends. If you have a high deductible health plan and a health care savings account (HSA), however, any money left in your account carries over to the next year with no penalty.
- Make sure you’re paying enough taxes. If you got married this year, got a raise or if you earn income from freelance work or cash tips, the amount of income tax you owe may be higher than you expect. The IRS has a calculator that can help you determine your tax liability or you can talk with a financial planner. If you will owe more than expected, start saving now to cover the difference.
- Start gathering your tax documents. It might seem early, but it’s a good idea to start to gather the documents you’ll need to complete your taxes next April. Though you probably won’t get your W-2 forms until next year, you may start receiving year-end investment statements, property tax and insurance statements and documents you’ll need for deductions, like mortgage interest statements. You can also start getting together business and real estate expense records and receipts and supporting documents for charitable deductions.
Taking the time to get your financial situation in good shape now can pay big dividends in the coming year.