There’s only a month left before the end of the year and that means that you still have 30 days to put your finances in order, make the most out of your money from a tax standpoint and start 2015 with a sound spending plan.
“Most people aren’t focusing on their finances at the end of the year, but there are some things that if you don’t do before Dec. 31, you lose opportunities,” says Charles Sachs, a principal with Private Wealth Counsel in Miami.
We all know we need to save for retirement, pay down debt and stop paying $4 every day for that Starbucks latte. And of course, confer with your tax accountant to ensure you’ve reached the right thresholds for maximum deductions. But here are four “reminders” to get your finances in order before the end of the year.
Max out your 401k contributions. By deferring as much as possible of your salary, you’ll significantly lower your tax payment for 2014. Sachs noted that he recently helped a client defer as much as $40,000 of her salary in the last few weeks of the year, saving her $16,000 in taxes.
You can use some of your salary or even your year-end bonus to max out your 401k for 2014. The limit for this year is $17,500 for those under 50 years old and $23,000 for those over 50 years old. In the case of Sachs’s client, a state university employee, she was able to contribute $23,000 to her 401k and $17,500 to her 457 Retirement plan. “When you have a higher salary, it’s obviously a little bit easier to do,” Sachs said.
Try the seven-day cash challenge. Edward Gjertsen, vice president at Mack Investment Securities in Northfield, Ill., recommends ditching credit cards for a full week. He said you should anticipate how much you’ll spend in cash (for everyday expenses such as gas, food and coffee, not for rent or utilities) and see how long your cash will actually last. “The point is that you’ll be more aware of where your money goes,” adding that most people run out of money by Wednesday. “When you don’t have credit cards, you control spending better,” William Schretter, a financial advisor with Raymond James in Lebanon, Ohio, said in an email interview.
Check your “convenience” payments. Think automatic payments that may come only once a year and get automatically renewed unless you stop them, such as magazine subscriptions or some kinds of gym membership. “We typically forget about these payments that automatically renew,” said Gjertsen. “We’re being swiped.” He noted that it’s a good idea to change the number of your credit card every year or couple of years since it forces you to look at payments you may have forgotten about.
Review your insurance coverage. This means all your insurance policies from life to health care, disability, long-term care, car and so on. You should do this checkup on an annual basis since insurance rates fluctuate and your own situation may have also changed since last year. You may find cheaper coverage at a competitor or qualify for a discount from your existing insurance company. “Shop around to see if there are better rates out there,” Maria Kutscher, CEO of Allovest in Huntington Beach, Calif., said in an email. This annual review is also a great opportunity to make sure you are adequately covered.
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