It may seem like just yesterday we were ringing in 2014, but here we are, already looking at the last month of the year.
If you are like most, you probably set financial goals for yourself for this year. And like many people, you may have lost a little steam on those goals as the months went by. Whatever the cause of the setbacks, now is the time to start getting your financial house in order. Not only will catching up on your money goals now help you finish 2014 strong, but you’ll also sail into the New Year in excellent shape to start building your wealth and a solid financial future.
Move #1: Make Your Charitable Donations
Most charities report that they receive a significant percentage of their donations in the last weeks of the year, as donors scramble to do whatever they can to reduce their income tax bill in April. While there isn’t any penalty for donating at the last minute, you need to keep a few important rules in mind to avoid having your gift applied to 2015 instead of 2014. For example, if you make a donation at 11:59 p.m. on December 31, and the charity doesn’t actually charge the card until 12:01 a.m., you are out of luck. When donating via credit card, the date the bank or charity charges your card is the date of the donation, so plan accordingly. When donating by check, the donation date is the date the check was mailed. Again, though, if you miss the mail cutoff on December 31, and the check isn’t postmarked until January 2, even if your check is dated in 2014, it won’t count as a deduction for this year.
Bottom line? Make all of your charitable contributions well before the last week of the year, especially if you are donating property or stocks, which must physically be in the hands of the organization before the deadline to count.
Move #2: Review Your Estate Plan
Because tax laws change annually, it’s always a good idea to review your estate plan each year to ensure that it is still the best option. At minimum, you should review your beneficiaries and ensure that all of the information is correct, or make any needed changes. If you do not have an estate plan, plan to meet with an advisor or attorney to start the process of creating one.
Move #3: Start a College Fund
If you have children, you have probably thought about college — more specifically, how you plan to pay for college. A 529 college savings plan allows you put away money now, and the earnings will be tax-free later if they are used for school. In some states, some or all of the contributions you make to the plan may also be tax deductible in the current year (depending on your income) so playing catch-up now can help you out come tax time.
Move #4: Review Your Employee Benefits
Studies show that most employees spend fewer than five minutes reviewing their benefits options each year, in most cases, just opt for the same package they had. However, you may be spending more money than you should, or missing benefits. Take time to review your employer’s offerings and compare them to your spouses. Under the new Affordable Care Act laws, you may be able to find a better deal on health insurance if you buy on the exchange, for example. Review your Flexible Spending Account as well to determine whether you over or under-contributed this year, and whether you have the option to roll over or delay using excess funds. Finally, look at your retirement plan contributions. If you will be earning more next year, don’t forget to increase your contributions accordingly.
Move #5: Review Retirement Allocations
How much time have you spent reviewing your retirement plan allocations since you opened the account? If you’ve had the same investments since day one, your portfolio could probably use a review. Look at your current allocations and make changes as needed to be more or less aggressive, or move your money into better performing funds.
Move #6: Make Financial Gifts
If you were planning to make significant financial gifts to family members or friends this year, now is the time to do it. Individuals can give up to $14,000 to anyone they wish, and as many people as they wish, without incurring gift taxes.
The end of the year is always a busy time with the holidays and everything that comes along with them, but while you’re busy making holiday cheer, make some time to get your finances straight too, and start off 2015 on the right foot.