Believe it or not, the holiday season is quickly approaching. Although you may be preoccupied with shopping trips and travel plans, it’s worth your while to take a break from the holiday hustle to do a comprehensive review of your finances. In order to make this process as smooth as possible — so you can get back to decking the halls — here are five financial planning tips to consider before 2012 comes to a close.

1. The Season for Saving

With the end of the year approaching, you are running out of time to take advantage of one of the best deals offered by Uncle Sam: the tax deduction for 401(k) contributions. For 2012, you can contribute as much as $17,000 into your 401(k) or other employer-provided retirement account. If you haven’t maxed out your contributions yet, you should consider doing so because there is no way to carry forward those contributions into future years — that tax space is lost forever.

2. The Season for Harvesting

All things considered, the stock market has done relatively well this year, but that may not be the case with all of your investments. If you have a poorly performing stock or mutual fund in a taxable account, you may want to sell those investments in order to offset any capital gains that you have accrued. Even if you are a buy-and-hold investor who has no interest in selling your investment, you could still benefit from tax-loss harvesting. After 30 days, you can buy back your investment while still using those capital losses to reduce your tax liability today.

3. The Season for Rebalancing

If you are like most people, you probably have had more important things to do in the past year than review your asset allocation. However, after another wild year on Wall Street, your mix of stocks and bonds may be out of whack. This means you could be inadvertently taking on more risk than you originally intended. Go ahead and redistribute assets to bring them in line with your personal tolerance for risk.

4. The Season for Giving

For a lot of people, the past couple of years have been very difficult. In an effort to make ends meet, many families rely on food banks and homeless shelters, which are struggling to meet the increasing demand for their services. In the spirit of the holidays, you may want to consider a charitable donation to help those in need. Not only do you get that warm feeling that comes from helping others, but you can also get a nice tax break if you itemize your deductions on your tax return.

5. The Season for Relaxing

The holiday season should be a time to relax with friends and family, but it can often be one of the most stressful periods of the year. In 2012, this stress has only been compounded by our friends in Washington, who are leading us precariously close to the so-called “fiscal cliff,” an automatic collection of tax increases and spending cuts that could lead us into another recession next year. Although you may be inclined to sell your stocks and reduce your risk until things work themselves out, you are probably better served to ignore the noise and stay the course. Predicting the future is typically a loser’s game for individual investors. Instead, focus on the things that you can control, such as your savings rate and your asset allocation.

By spending just a couple of hours now to review your finances, you can make sure that you are prepared for whatever may come your way in 2013. It might just be the best investment you’ll make all year!

Is your portfolio's check engine light on? Get a FREE Financial Diagnostic to find out what to do.

The recent volatility and economic downturn means your portfolio might be showing some flashing lights. If you’re wondering if you’re still on track after investment losses, let’s talk.