Money Moves to Make Before the End of the Year
The end of the calendar year means different things to different people. Some love autumn, some are enjoying football season, and others are looking forward to the holidays. For all of us, though, it means the year is ending, and that brings certain rituals and responsibilities. The end of the year is a great time to look back over your financial year and make some moves to set you up for a great new year.
Review Your Credit Report
Did you know that all Americans are entitled to a free annual credit report? You should make sure to pull your credit report every year. Research has shown that more than one in five people have a “potentially material error” in their credit report that’s hurting their credit score. What sorts of errors should you look for?
- Wrong Personal Information: Although information like your employer or address doesn’t directly impact your credit score, creditors often check that information against the information you provide when you apply for credit.
- Signs of Fraud: Look for any accounts you haven’t opened that are being reported under your name. Go through the inquiries section to see if any applications you aren’t familiar with are in there. That’s a sign someone is trying to get credit under your name.
- Errors in Account Data: Make sure your limits, usage, and payment history are all being reported and reported correctly.
- Outdated Information: Late payments or charged-off accounts are only allowed to appear on your credit report for a certain amount of time. Check negative items and dispute any that should have fallen off by now.
Spend Any Remaining FSA Funds
Flexible spending accounts are an excellent way to use pre-tax money to cover medical or dependent care expenses. However, there’s a deadline for using that money, and usually, it’s the end of the year. Some plans give you until March 15 to use the previous calendar year’s contributions, so check with your plan to see when you need to use the FSA funds you contributed this year. Research has shown that FSA participants lose about 4% of what they put in, an average of $60, because they don’t use it up by the deadline. Across the country, that adds up to more than $150 million a year! Don’t leave your money on the table: Make a plan to use it all before you lose it. A good way to use up your FSA funds is to replace your glasses or contact lenses or stock up on over-the-counter medications and medical supplies. Keep in mind, though, that if you have an HSA, or health savings account, instead of an FSA, you can go ahead and leave that money in there; HSA money can be carried over into the following year.
Go to the Doctor and Dentist (But Plan Carefully)
Another way to use up your FSA funds is to go to the doctor or dentist. Before you do, though, it’s important to check to see if you’ve met your deductible and/or out-of-pocket limit for the year. If you’ve hit your deductible, especially if you’ve also hit your out-of-pocket limit, you’ll want to schedule any needed medical care to fall within this calendar year, before those amounts reset in January. Conversely, if you haven’t hit your deductible and you know you have expensive medical needs on the horizon, think about waiting until the new year to visit the doctor or have any procedures. That way, you can hit your deductible and/or out-of-pocket limit early in the year, and your medical expenditures will be lower for the rest of the year. If you’re going to the dentist, also keep in mind that dental plans often have yearly limits. Make sure your procedures will stay under that limit. If not, schedule procedures up to that limit for this year, then schedule the rest for next year.
When faced with unexpected and emergent medical needs, it is important to understand all of the lending options that may be available to you. If medical benefits are not sufficient to cover the necessary procedures, a personal loan or title-secured loan may be available to help fill in the financial gaps quickly so that you can get the medical care needed.
Get Organized for the Holidays
The rest of the year will fly by, so now is the time to plan for the holidays. The average American will spend more than $1,000 on their holiday shopping: Is your budget prepared for the hit? If not, it’s time to start dedicating funds to cover holiday expenses. And of course, holiday expenditures often extend far beyond Christmas gifts. If you’re hosting festivities, now is the time to take stock of your home and address any issues that would make hosting problematic. It’s also an excellent time to go through your entertaining supplies and holiday decorations and make a list of anything that needs to be replaced or purchased. Planning on traveling over the holidays? Now is the time to book flights or reserve lodging. The closer we get to the holidays; the more expensive flights and hotel rooms will become.
Give Money Away
The end of the year brings appeals to your mailbox and inbox from various nonprofit organizations asking for end-of-the-year donations. Did you know that 50% of all donations are made in December? There are two reasons for this. The first reason is that’s it’s the season of giving, and helping the less fortunate makes people happier. But also, the IRS gives tax benefits to people who itemize their deductions and donate to registered nonprofit organizations, meaning that an end-of-year gift to a local soup kitchen or a national charity can save you money on your taxes.
Organize Tax Documents and Financial Records
Tax season will be upon you as soon as the calendar changes over on Dec. 31, so now is the time to organize your records and prepare to file your taxes. Freelancers or people who had multiple employers over the past year will want to make a checklist of all expected W-2s or 1099s so you can check them off as they come in during January and follow up on any missing tax documents from employers in February. Collect documentation for expected tax deductions such as charitable giving, medical expenses, and child-care expenses. Own a house? Property owners can deduct up to $10,000 in property tax expenses. While you’re at it, go over all of your account statements and make sure your debt payment and savings goals are on target.
Maximize Your Retirement Contributions
Have you reached the limit for retirement contributions for the year? If not, and if you have the funds available, it’s a great time to make extra contributions. For all employer-sponsored retirement plans, including 401(k)s, 403(b)s, and the federal employee Thrift Savings Plan, the contribution limit for 2019 is $19,000. If you are or will be 50 or older by the end of the year, you can make a catch-up contribution of up to $6,000. If you have an IRA, the limit is $6,000 for those under 50 and $7,000 for those over 50. All of these limits will rise in 2020.
Set Next Year’s Budget and Financial Goals
After reviewing this year’s financial documents and budget, it’s time to start thinking about next year’s financial goals! Analyze this year’s income, expenditures, retirement contributions, FSA contributions, donations, debt repayments, and savings. Was it a struggle to use up all of your FSA funds before the end of the year? Next year, you should probably reduce the amount you contribute. However, if you know your kid is getting braces next year, you might want to increase your contributions so you can pay for the orthodontia with pre-tax dollars. Did you eat out too much and save too little? Start plotting ways to eat more meals at home and bump up your savings rate in the new year. Can you adjust your budget to meet the maximum retirement contribution next year? Contact your plan administrator to raise your contribution. Writing out concrete goals and making plans for how to achieve them will increase the likelihood that you will meet your financial goals next year.