Let’s talk New Year’s Resolutions. So many of us seem to have a love/hate relationship with them. Every year, we create these lofty goals, only to push them to the back of our minds by April (okay fine, February).
When you watched the New Year’s Eve countdown last December and raised your glass to 2017, did you make a resolution to put your money and finances first this year? Finance-related resolutions are the third most popular New Year’s resolution, coming in right after self-improvement and weight loss.1 Millions of people vow to get out of debt, save more, or reach a financial milestone.
It’s never a bad idea to set financial goals, but it’s time for honesty: How did you do with your plans? Did your resolution fall to the wayside, as they do for 92% of people?2
The good news is that it’s not too late to make some headway on your 2017 goals, but you need to start now. Stores are already rolling out their Christmas displays, so get a jump start on these ten financial actions before you ring in 2018.
1. Squeeze In More Retirement Savings
This is best practice regardless of what time of year it is, but if you’ve eschewed my prior gentle nudges (another one) to save every penny you possibly can (and glean the benefits), it’s time to get on the ball before it’s too late.
This year the IRS is letting you contribute as much as $18,000 (or $24,000 if you are 50 or older) to an employer-sponsored account. For Roth or traditional IRAs, you can contribute as much as $5,500 (or $6,500 if you are 50 or older).
2. Use Your Medical and Dental Benefits
Did you have good intentions of taking care of some dental work, blood tests, or other medical procedures but no follow-through? I get it. Life gets crazy sometimes and some stuff gets pushed to the side. But you are putting money into your health plan, so make sure you get some value out of it.
Now’s the time to take advantage of all your healthcare needs before your deductible resets. Dental plans in particular often have a maximum coverage amount. If you haven’t used up the full amount and think you need some treatments, make an appointment before December 31st.
3. Check Expiring Sick and Vacation Time
Don’t lose what you’ve earned. Depending on your company, your sick or vacation time might expire at the end of the year. Check with your HR department to learn about any expiration dates. If your sick or vacation time does expire, fit in a last-minute vacation, a staycation, or trips to the doctor to use up your earned time off.
4. Use Your Flexible Spending Account
Just like #2 and #3, you’ll want to use up your FSA (Flexible Spending Account) dollars by year’s end. Your benefits won’t carry over and you’ll lose any unspent money in your account at the end of the year.
5. Double Check RMDs
If you’re retired, review your retirement accounts’ required minimum distributions (RMDs). An RMD is the annual payout savers must take from their retirement accounts, including 401(k)s, SIMPLE IRAs, SEP IRAs, and traditional IRAs, when they turn 70½. If you don’t, you could face the steep penalty of 50% of the distribution you should have taken. To calculate your RMD, you can use this handy online calculator.
6. Stay on Top of Charitable Contributions
If you made a charitable contribution in 2017, you might be able to lower your total tax bill when you file early next year. It can be especially advantageous if you donated appreciated securities to avoid paying taxes on the gains. Along with your other tax documents, find and organize any receipts you have from donating to charities, whether it was a cash donation, securities contribution, or another type of gift.
7. Review Your Insurance Coverages
A lot can happen in a year (just look at the White House). When you get a new job, tie the knot, or have a baby, your life insurance coverage and beneficiaries need to be revisited. You might also want to evaluate your need for other types of insurance you may not currently have, such as long-term care insurance or disability insurance.
8. Set a Budget for Holiday Spending
Americans will spend nearly $1,000 this year on holiday gifts alone.3 If you don’t want the holidays to plunge you into debt, create a budget and stick to it! Break down your spending and allocate a set amount of funds for everything you need this holiday season, from gifts to travel to food. Be realistic about what you can afford to spend.
9. Consider a Roth Conversion
Roth IRAs are attractive because you don’t pay income tax when you withdraw funds in retirement. But if you make too much money, you may not be eligible to contribute to a Roth and instead invest in a Traditional IRA. But you could have the opportunity to convert to a Roth IRA and save money on taxes in the long run. The deadline to convert to a Roth IRA is December 31st, so time is of the essence.
10. Give Without Gift Tax Consequences
It’s never too early to start planning the legacy you want to leave for your loved ones without sharing a good portion of it with Uncle Sam. Each year, you can gift up to $14,000 to as many people as you wish without those gifts counting against your lifetime exemption of $5 million. If you’ve yet to gift this year or haven’t reached $14,000, consider gifting to your children or grandchildren by December 31st, even through a 529 account that will give them a head start on getting through college.
Is your head spinning yet? Let’s boil it down to this: before the year is out, do what you can to get your financial house in order. That way, instead of starting a new year looking at all the ways you need to improve your finances, you can focus on maintaining the progress you’ve made and staying true to your financial strategies.
Finish the year strong with our 14-day financial improvement plan. Our powerful, easy to implement ideas will yield BIG results over time. Try it.
For many people, a 401k is their largest retirement account. It deserves your undivided attention. Download our Ultimate 401(k) Guide for a step-by-step strategy to master your 401(k), including a prioritized checklist. It’s free!
Pathway founder and principal Greg Brown is a fee only financial advisor with broad financial planning and investing expertise. Greg’s financial advice has been featured in publications like Yahoo Finance, Bankrate, Investopedia (all articles here), Wall Street Journal, and USA Today. He holds a master’s degree from the University of Chicago and a mechanical engineering degree from Michigan State University. Prior to Pathway, Greg was a lead analyst at Morningstar and previously held engineering roles at Dell (including a US Patent).
Also published on Medium.