The end of the year is a nice time to examine your financials more closely, and to take some thoughtful actions, to set you for success next year (and beyond). Whether it’s saving, investing or just tracking your expenses, some well-timed money moves can save you a lot of headaches. Below are a few to consider before the calendar flips:
1. Examine your budgeting and expenditures
First off, look closely at where your money has gone over the last few months. Find categories of spending that are draining you stricly for the waste of it -- subscriptions that you have barely engaged in, or bona fide impulse buys. This may take a little time to calculate an up-to-date, but reasonable, budget - you may finish the year off well and have yourself started out for the new year with rational expectations.
2. Pay down high-interest debt
High interest debt (credit cards, personal loans, etc.) can take up a lot of your hard earned money in interest payments, often without you even realizing it. Before the year ends, consider applying excuse money or additional money into those debts sooner, rather than later, even small extra amounts will cut down on the total interest overall amount, over time.
3. Increase Your Savings
If you have trouble making it a habit to save in the past year, now is a great time to increase your savings. Set up a small percentage of your income to go to an emergency fund, money-market, or high-yield savings account to get started. A small increase in savings before the end of the year can provide peace of mind and financial cushion if you incur unexpected costs.
4. Capture Tax Deductions
You may have reached the end of the year, which often means this is the time to reduce taxable income. Depending on your location, you may want to pay some contributions into retirement accounts, health savings accounts (HSAs), or make contributions (donations) to charity to capture your tax deductions. A bit of tax planning can help you keep money in your pocket.
5. Rebalance Investments
If you have been investing, the end of the year provides an opportunity to review your portfolio to see if it still matches your goals and risk profile. Changes in the market can cause the allocations within your investments not to be aligned with your objective, so implementing some rebalancing at the end of the year can be a good way to reduce risk or achieve better long-term returns.
6. Make Plans for Goals Next Year
Think about what you would like to do financially in the new year whether that is buying a home, starting a business, or simply saving more. By thinking about these goals now, you begin creating a plan and a budget that align to those goals.
7. Spend Wisely When Treating Yourself
Holidays tend to be spendy. It's important to enjoy the holidays and celebrations as always, but also not to go overboard on a spending spree. Look for the sales, plan a budget for gifts, and create an experience that is more focused on 'experiences' rather than expense.
Conclusion
Beyond holidays, the end of the year is a time of celebration. It's also a time to look back and reevaluate your financial plan. If you've spent some time looking back on your budget, reducing your debts, saving money, and planning for the future, I think you can count it as a positive year! You can end the year on a high note, as well as start an new year with a sense of accomplishment.
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