While you might feel that 2017 cannot end quickly enough, it’s important to take time to set yourself up for financial success before ringing in the new year. You may be planning on making a few money-focused resolutions this year, or you might simply want to tidy up your finances. Either way, the following can help you make the most of the money you have, and save you time and energy during the coming year.
Take Time to Review Your Finances
At least once a year, take time to review your finances and figure out where your money is going. You may be surprised to find that savings opportunities are staring right at you. Plus, you can use the information to start the new year from a place of certainty.
- Check your subscriptions. Consider whether you need all of your subscriptions, and if you’re using each one enough to warrant the cost. This might be an opportunity to eliminate a subscription altogether, or simply downsize to a more economical package. For example, if you have monthly a fitness membership but aren’t able to make it to many classes, a 10-class pass might be a cheaper option. You can also review your bank and credit card statements for unfamiliar monthly bills, perhaps from a free trial that automatically renewed, and you never canceled.
- Review your beneficiaries. Whether you have a savings account, retirement plan, or insurance policies, review the accounts’ beneficiaries. This can be particularly important if you got married, divorced, had a child, or there were other changes in your family. If you don’t have beneficiaries assigned, you may be able to quickly add someone by logging into your account and typing in the person’s name, address, birthdate, and the percentage you would like them to receive. This may also be an opportunity to include or remove someone from your list of beneficiaries.
- Look for insurance discounts. Many insurance policies, including auto, renters, and homeowners insurance, have a variety of potential discounts. But you might miss out if you don’t ask. Call your insurance agent and ask if you qualify for any new promotions or discounts. With auto insurance, you might be able to save money based on your driving record or how many miles you expect to drive in the coming year. Also ask about savings opportunities, such as buying an anti-theft device or taking a defensive driving course.
- Don’t lose FSA funds. If you signed up for a Flexible Spending Account (FSA) with your employer, you may lose any money that’s in the account at the end of the year. Employers can opt to let employees roll over $500 from one year to the next, or give you a two-and-a-half-month grace period, but you’ll need to check with whomever manages your benefits to find out if it does. If it doesn’t, and you have money in the account, you’ll want to spend the money on an eligible medical expense. The list is pretty extensive, though, and may include acupuncturists, chiropractors, glasses, contacts, contact solution, band-aids, condoms, sunscreen, and acne treatment creams.
Focus on Saving in the Next Year
The new year is often a time of self-reflection and goal setting. Perhaps there’s a new skill you’ve been meaning to learn, a practice or habit you want to incorporate into your daily routine, or a trip you’d love to take. Putting part of your financial life on auto-pilot could help you achieve a wide variety of goals.
Starting with an emergency fund, savings that can cover at least three months of expenses, can be important. From there, find the right savings account, set goals, and automatically transfer money into them each month. The low-touch approach lets you focus on living your life while the savings accumulate in the background. And when it’s time to sign up for a class or book a flight, your savings will be there to help you out.
Consider End-of-Year Tax Moves
Although you may not need to file a tax return until April, you may be able to take actions not that will affect how much you have to pay, or how much you get back, when you file.
- Try to move income forward or back. Hourly and salaried employees don’t often have much of a say in when they get paid. However, if you earn commissions, are self-employed, have a freelance job, or are expecting a holiday bonus, you might be able to ask for the pay before the end of the year, or after the start of the new year. When you receive the money (e.g. when you get the check, not when you deposit it at the bank) will determine if it’s part of your income for this year, or next, and when you’ll pay taxes on it.
- Contribute to tax-deferred accounts. Making contributions to tax-deferred accounts, such as a 401(k), IRA, or 529 Savings Plan could lower your taxable income for the year, and lead to a lower tax bill or larger refund. But prioritize building an emergency fund over increasing retirement savings.
- Take required minimum distributions (RMDs). You may have to take money out of a tax-deferred retirement account by the end of the year if you’re 70-and-a-half years old, or older. If you don’t, you might have to pay extra taxes on the amount you don’t withdraw.
Read Over Your Credit Reports
If you already regularly check your credit, you can skip this one. But especially considering the recent Equifax hack, you may want to review our credit reports for suspicious activity. If you see an account that you don’t remember opening, that could be a sign of identity theft.
Keep in mind that sometimes the name on your credit report could be the bank that your lender used to finance your account, which might have a different name. As a result, it may be difficult to recognize the account, but it could still legitimately be yours.
Whether or not you set New Year’s resolutions, the end of a calendar year is a great opportunity to think about your personal and financial goals. Set yourself up for success in the coming year by reviewing your finances, looking for savings opportunities, and getting organized.