13 Smart Money Moves to Make Before the End of the Year
You had all kinds of good intentions about getting your finances your order in 2018. And now, you can't believe how fast this year has gone by, and you have yet to balance your checkbook, much less increase your net worth. Don't beat yourself up too badly. The truth is, from now until the end of the year, there's still plenty that you can do that will make all the difference when it comes to your bottom line.
Take an honest look at your finances
Before you crack open the bubbly and ring in 2019, set aside time to go over your finances and take stock of your financial health, including your retirement accounts, your credit card debt, your student loans, etc. Then, assess where you are—and where you would like to be. “Ask yourself, ‘What are the unnecessary expenses I can cut before the end of this year? Can I bump up my savings?'” says Tony Drake, CEO and founder of Drake & Associates. “If you don’t have a budget, now is the time to set one. This is also a good time to set up a meeting with your financial professional for an annual review.” Find out how to make a budget you can actually stick to.
Get those estimated taxes in
If you are self-employed, if you had large capital gains, if you sold a property, or if you withdrew money from your IRA or 401(k), you may owe additional taxes this year. “In our pay-as-you-go system, the IRS doesn’t want to wait. Estimated taxes should be paid before January 15, 2019,” says Abby Eisenkraft, an enrolled agent with Choice Tax Solutions. The upside in paying estimated taxes now means you won’t get hit with quite as large a bill come April.
Review your allowances at work
You may think you’re paying enough to the IRS since such a large chunk goes missing from your paycheck regularly, but millions of taxpayers are under withholding unintentionally, says Eisenkraft. The IRS offers a Withholding Calculator where you can gauge how you’re doing, but keep in mind it doesn’t factor in self-employment, a dual income household, or other common situations.
If you had a major life change this year (you got married or divorced, had a baby), you need to take it into account as your filing status likely needs to change as well. Allowances that may have worked for you when you were single may not when you are married, and vice versa—especially with the new tax law, says Eisenkraft. Read on to find out everything you need to know about filing taxes after a big life change.
Maximize your 401(k) contributions
You have until December 31st to contribute to your 401(k). “The more money you contribute, the lower your taxable income. It’s a win-win,” says Eisenkraft. Make sure you have maxed out or contributed all that you can (up to $18,500 or $24,500 if over 50). If you have an IRA, good news: You have up until April 15, 2019, to make contributions to your account for the 2018 tax year. Find out the 16 money mistakes everyone has made, even financial experts.
Turn in your out-of-pocket expenses
If you haven’t submitted your covered expenses to your employer, what are you waiting for? Do it now before you lose those receipts; a Capital One survey found 47 percent of workers didn’t claim all their expenses owed to them and the number one reason was that they couldn’t find their receipts.
Check your credit report
You should check your credit score regularly and look at your full report annually at a minimum. (You can get a free credit report each year from each of the three major bureaus, Equifax, Experian, and TransUnion.) Look for unauthorized purchases, amounts that are different from what you actually paid, incorrect dates for purchases, missing payments, and accounts that you didn’t authorize. Even your Social Security number and personal information can be wrong, which could make you responsible for someone else’s debt. Mistakes on your credit report could lead to a lower credit score than you deserve, and a lower score could make it harder and more expensive for you to get approved for a credit card, a mortgage, car loan, or any other type of financing. “The difference between a good credit score and a bad credit score can add up to thousands of dollars over your lifetime, so checking your report each year is well worth it,” says Drake.
Use up that FSA account
If you have a flexible spending account (FSA) through your employer for out-of-pocket health costs or a dependent care flexible spending account (DCFSA), now is the time to start spending any remaining funds. Make that appointment to see your optometrist for new glasses or your dentist about that crown you want to have replaced. For a DCFSA, look into after-school programs or holiday camps for your child. Find out more smart ways to use your FSA funds.
Explore options for reducing interest rates
If you have credit card debt, look for ways to lower your interest rate. These include balance-transfer cards offering special 0 percent promotional rates for a set period of time (usually for 12 to 18 months). You’ll typically pay a small one-time fee of around 3 percent of the transferred balance, but you won’t have to pay interest on a monthly basis until the time period of the promotional rate is up. (And you’ll be paying it off before then, right?) Once the promotional period ends, the interest rate will go up, sometimes aggressively, cautions Laura Stover, CEO and investment advisor at LS Wealth Management.
Determine if you’re taking the right level of risk
Investing too conservatively could mean you’re not going to earn enough while investing too aggressively puts you at risk of losing everything. “One guideline for determining how much to invest in the stock market is the 100 Age Rule,” says Stover. “Subtract your age from 100 to see how to diversify your portfolio. For example, if you’re 60 years old, you would invest 40 percent of your portfolio in stocks and the remainder in safer options such as bonds, CDs, or a savings account.”
Remember your required minimum distributions
If you are over 70 1/2 years old, you must take your required minimum distributions from your retirement account by the end of the year to avoid costly penalties. If you’re not sure if you have already or how much that amount is, consult the financial company that runs your account, says Glenda Hassan, CPA and CEO of Money Matters. The same rule applies if you are younger and have an inherited IRA or 401(K) account, she says.
Get in the spirit of giving
You have from now until the end of the year to make any tax-deductible charitable contributions of money or goods to your favorite non-profit. (Make sure your donation receipt reads 2018.) Before you do, however, create a budget for the upcoming holiday season so you know exactly what you can afford, says Brian Colvert, CEO of Bonfire Financial.
Check in with your CPA
Call or meet with your CPA or accountant about tax planning before the end of the year to make sure you’re on the right path. You never know what you may have overlooked and this 15 to 20 minutes could turn out to be the most important of the year. Besides, after January 1, they will get really busy, really fast. Don’t miss the 13 secrets debt collectors won’t tell you.
Review your mortgage
If you haven’t refinanced your older mortgage in the past few years, now is the time. “Interest rates are on their way up,” says Joseph Conroy, author of Decades & Decisions: Financial Planning at Any Age. “Shop your current mortgage rate around before the opportunity is gone.” Yes, the time and paperwork involved is a hassle, but your mortgage is a 15 or 30-year loan and a lower rate could save you thousands during that time period. Next, read on for money-saving resolutions to make in 2019.