It’s the holiday season and your schedule may be filled with parties, cookie making, and spending time with family and friends. But you better not pout, you better not cry, we’re telling you why. While Santa Claus is coming to town this month; in a few short months so is tax-time. Read our year-end financial tips that might help keep you off the naughty list come April 15th.
- Max out retirement contributions. You have until you file your taxes next spring to make a 2016 contribution to an individual retirement account (IRA), but 401(k) contributions are only deductible in the calendar year they are made. Want the deduction for 2016? Make the contribution in 2016. You should check the IRS website to determine if you are eligible to contribute to an IRA, or to be able to deduct those contributions.
- Use up Flexible Spending Account (FSA) money. Money in a flexible spending account for health care expenses must be spent in that calendar year or you’ll lose any unused funds. If you have funds left, see about ordering a new pair of glasses or schedule dental work before December 31.
- Donate to charity. December 31st is the deadline for charitable contributions that you plan to deduct from your 2016 taxes. Make sure you have appropriate documentation for your donations.
- Check your beneficiaries. Review who your beneficiaries are on any retirement accounts, or insurance policies. While you can review and update beneficiaries at any time throughout the year, it is a good idea to get in the habit of doing it annually. Year end is good time as people become reflective about the past year and all the changes (good or not) that has happened.
- Give your emergency fund a tune up. Did you receive a promotion or raise this past year? Move? Buy a different vehicle? An emergency fund ideally covers 3-6 months of living expenses so if anything has changed you might want to adjust your emergency fund so it is sufficient to cover current expenses.
- Review your life insurance policy. Since we just mentioned life changes that may have happened, review your life insurance policy to make sure you have adequate coverage to cover any changes that may have occurred. You can use our simple life insurance calculator to see if you are on track.
- Review your spending and plan your 2017 budget. The holidays are a time of reflection and you can add your past year’s spending to that. While the holiday season may seem like the last place you want to think about how you’ve spent your money over the past year; it’s actually a great time. Look at your expenses with curiosity and without judgement so when you set next year’s budget, you are doing so with information and education – not remorse and guilt.