Whether you like it or not, the holidays are upon us and before you know it, the end of the year has arrived. Our lives can get overwhelmed with activities and year-end tasks that we wish we had finished months ago. So before you get too busy, take some time now to work on your financial year-end to-do list. Here’s a list of things that should be done before the end of this year and, for that matter, every year.
TEND TO YOUR INVESTMENTS
Most financial planners agree that one of the most important determinants of investment success is having an appropriate asset allocation. Simply put, that means having the right amount of your investment dollars in the right asset classes, according to your investment goals. When we make our contributions, for example, we may allocate 70% to stocks and 30% to bonds. But if stocks were to perform well, and bonds not so well, you may end up with an asset allocation of 80% stocks and 20% bonds. If this were the case, you may be weighted too heavily in stocks. Now is a good time to bring your asset allocation back in line by rebalancing your portfolio.
Also, if you are able to cut any expenses, were fortunate enough to get a raise this year, or otherwise have extra cash flow, why not funnel that money into your retirement savings?
REVISIT YOUR BUDGET
If you already have an annual and monthly household budget, now’s a good time to review it and make any needed adjustments. Don’t forget to factor in the expenses of the upcoming holidays. If you don’t have a budget, make one.
If you have any magazine subscriptions, gym memberships, clubs, or other automatic deductions for products and services you no longer use, cancel them now. If you have land-line phone service, do you still need it?
SHOP RATES
Insurance companies know that many customers are too busy to find the time to make changes and they bet that you’ll continue to accept their terms. Don’t be a victim! Take a moment to go online or make a few phones calls. Find out if you can pay less for the same insurance coverage.
The same strategy that insurance companies use is also used by banks. Review the interest rates you are getting on your savings and checking. What fees are you paying? Some banks will offer hefty incentives to get your business. Don’t forget to take a look at credit unions, too.
And while you’re at it, find a credit card with a lower rate. Chances are, if you’ve been carrying a balance on your credit card for a while, they’ve raised your interest rate. A quick internet search is sure to find you several card issuers offering interest-free balance transfer incentives.
Read Related: 12 Reasons Why You Need a Will
PREPARE FOR TAX SEASON
It may seem a little premature, but time flies. And much of the work for next April needs to be done before the end of this year.
- Do an income tax projection now to make sure you will have paid enough income taxes by year end. You don’t want to end up owing penalties come next spring.
- Donate unwanted items to charity.
- If you have the extra money, you may be able to lower your taxes by accelerating your deductions. For example, pay property taxes due next year before the end of this year. If you are self-employed, make January’s tax deductible purchases in December.
- If you are over 70 ½ years old, you need to take your IRS required minimum distribution from your IRA before December 31.
- If you participate in a Flexible Spending Account (FSA), use up any funds that may expire by December 31.
PLAN FOR THE UNEXPECTED
This is never any fun to think about, but we never know how the day will end. So make sure your affairs are in order, just in case.
- Review the beneficiaries on your retirement savings and other investment plans.
- Review your life insurance coverage and designated beneficiaries.
- Make sure your will and other estate planning documents still reflect your wishes. If you don’t have an estate plan, set up an appointment with a qualified attorney.
REVIEW YOUR CREDIT REPORT
A survey of studies suggests that 80%-90% of consumer credit reports contain errors. When you consider that poor credit could cause you to be denied credit, pay higher rates on loans and auto insurance, or even keep you from getting a new job, there’s really no excuse not to review it at least once a year. You can obtain a free copy once a year at AnnualCreditReport.com.
