As the year winds down, now is a perfect time to take stock of your financial health and make strategic decisions that can set you up for success in the coming year.
Whether it’s optimizing your tax situation, reassessing your budget, or planning for future goals, there are plenty of things you can do before December 31 to set yourself up for success in the upcoming year.
Here’s a comprehensive guide to the key financial tasks to address before the year ends.
1) Tax Preparation: Start Now to Save Later
Max Out Retirement Contributions
Contributing to retirement accounts like 401(k)s or IRAs not only bolsters your savings but can also lower your taxable income.
For 2024, the contribution limits are $22,500 for 401(k) plans (plus $7,500 in catch-up contributions for those 50 and older) and $6,500 for IRAs (with an extra $1,000 for those over 50). Ensure you’ve contributed as much as possible to take full advantage of these tax benefits.
Your essential guide to planning for retirement!
Organize Tax Documents
Avoid the last-minute tax scramble by gathering essential documents, such as W-2s, 1099s, and receipts for deductible expenses. This will make filing your taxes in the new year smoother and help you identify any additional tax-saving opportunities.
Make Charitable Donations
If you itemize your deductions, charitable contributions made before December 31 can reduce your taxable income. Consider donating cash, goods, or even appreciated securities to qualified organizations to maximize your impact and tax benefits.
2) Budget and Savings: Reflect and Reset
Review Your Budget
Take time to analyze your spending habits over the past year. Were there areas where you consistently overspent? Areas where you want to invest more financially? Use these insights to fine-tune your budget for the new year.
Create a realistic spending plan!
Spend Flexible Spending Account (FSA) Funds
Many FSA plans have a “use it or lose it” policy, meaning unused funds are forfeited at year-end. Review your FSA balance and spend remaining funds on eligible expenses like medical, dental, or vision care.
Boost Your Emergency Fund
An emergency fund is your financial safety net. If yours isn’t where it should be—ideally, 3–6 months’ worth of expenses—allocate any year-end bonuses or extra cash to pad your savings.
3. Debt and Credit: Strengthen Your Financial Standing
Pay Down High-Interest Debt
Credit card debt can be a significant financial drain due to high interest rates. Use any extra funds to make larger payments on high-interest balances to save money in the long run.
7 secrets to pay off debt FAST!
Check Your Credit Report
Review your credit report for errors or inaccuracies that could impact your score. You’re entitled to a free credit report annually from each of the major credit bureaus (Experian, Equifax, TransUnion) via AnnualCreditReport.com.
4) Investments: Realign for Your Goals
Rebalance Your Portfolio
Changing life situations can cause your investment portfolio to drift from your target allocation. Rebalancing ensures your investments align with your risk tolerance and financial goals.
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Consider Gifting Stocks
Transferring appreciated stocks to family members in lower tax brackets or donating them to charities can provide tax advantages while supporting your loved ones or causes you care about.
5) Personal and Family Financial Planning: Secure Your Legacy
Review Insurance Coverage
Life happens, and your insurance needs may have changed over the past year. Reassess your health, life, home, and auto insurance policies to confirm they provide adequate protection.
Update Beneficiary Information
Major life events like marriage, divorce, or the birth of a child are great reminders to update beneficiary designations on retirement accounts, life insurance policies, and wills. This small step can prevent complications down the road.
Contribute to 529 Plans
If saving for your children’s or grandchildren’s education is a priority, consider contributing to a 529 college savings plan. Contributions made before year-end may qualify for state tax benefits.
6) Strategic Purchases: Plan Ahead for Tax Benefits
Make Tax-Deductible Purchases
For small business owners or freelancers, investing in deductible expenses like office equipment or software before year-end can lower taxable income and enhance productivity.
And don't forget -- education costs count! Now may be the perfect time to join a program like Million Dollar Year. (Hint: if you check out our free workshop, we'll offer you a special price to join!)
8 business expenses to write off!
7) Set Goals for the New Year: Prepare for Success
Outline Financial Resolutions
Reflect on your financial progress this year and set clear, actionable goals for the year ahead. Whether it’s increasing your savings rate, investing more, or eliminating debt, having defined objectives can keep you motivated.
Set Yourself Up for Success -- This Year and Beyond!
Taking proactive steps before December 31 can have a huge impact on your financial health, both now and in the future. By addressing these essential money tasks, you’ll not only maximize your opportunities for savings and growth but also start the new year on solid financial ground.
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