Can you believe we are nearing the end of 2016? It seems as though this year just began, but we’re already approaching the final weeks and heading into 2017. December is often a celebratory time of year, but for many, it can be overwhelming. The end of a year usually brings moments of reflection where we might realize we have not accomplished all our goals and we try to squeeze in a few last-minute projects before we ring in the new year.
Just as your wallet won’t be gathering dust this season, don’t let your financial plan fall to the wayside. Here are six important financial actions to take before we enter a new year.
Examine Your Insurance Coverage
A lot of changes can occur in a year. As we experience life events, from the birth of a child to marriage to a new career, it’s crucial to review your insurance coverage periodically. The beginning of a new year is an ideal time to take another look at your current insurance policies and ensure they are up-to-date.
While checking up on your policies, make sure that your beneficiary designations are still current and appropriate. If you experienced a job change and have a new 401(k) or life insurance policy, opened a new IRA, got a divorce, or had a child, make sure your beneficiary is accurately listed.
Your financial advisor can also help you determine if now is the time to consider other forms of insurance, like long-term care insurance, as well as answer any questions you have about how to choose beneficiaries.
Strategize Your Charitable Donations
‘Tis the season for giving. But beyond exchanging gifts with your loved ones, this is the time of year when many people choose to give back. If you make a charitable contribution before December 31st, you may be able to lower your total tax bill for 2016. It can be especially advantageous to donate appreciated securities to avoid paying taxes on the gains. To see how a donation may affect your financial plan, work with a professional financial advisor.
You’ll also want to research which charities you’d like to support, as not all giving is created equal. To make sure the highest percentage of your donation goes to your intended recipient, it’s important to vet the charity you’re considering. Look up the organization on charitynavigator.org or The Better Business Bureau’s Give.org to verify their legal status, check their records, and even review executive compensation.
Tackle Debt Before Rates Increase
When the average U.S. household is $129,579 in debt due to mortgages, auto loans, credit card balances, and student loans, there’s rarely a bad time to review your debt and strategize how to minimize it. With the chance of an interest rate increase in the near future, now is the time to analyze your debt load to avoid paying higher fees on credit cards with variable rates.
To make this a reality, create a spreadsheet of your debts and compare the interest rates and balances. If you have a loan with a significantly higher interest rate than the others, work on repaying that one first. If you feel overwhelmed by your multiple loans, pay off the loan with the smallest balance first, no matter the interest rate. If you have student loans, try to pay those off so you can reap the tax benefits when you file in 2017.
Max Out Your Retirement Savings
One of the best ways you can simultaneously save for your future retirement and qualify for tax breaks when you file in 2017 is to take advantage of a company-sponsored retirement account, especially if your employer matches your contributions. The most common 401(k) match is 50 cents per dollar up to 6% of your pay. If you earned $100,000 annually, you could save $6,000 each year and get an additional 401(k) match of $3,000, totaling $9,000 per year.
If possible, increase your contribution before the end of the year. For 2016, you can contribute as much as $18,000 (or $24,000 if you are 50 or older). To avoid making hefty payments at the end of the year next time around, consider increasing your contribution by 1% every quarter until you reach your goal.
Rebalance Your Portfolio
Make it a habit to review your portfolio with your financial advisor and rebalance your investments. Rebalancing can help you take assets that are above your target percentage and buy what you need using the funds you receive from selling what you have too much of. If done annually or semi-annually, rebalancing will make sure that your portfolio is in the best shape possible.
During this review, you can also focus on analyzing your risk tolerance, time horizon, immediate needs, and long-term objectives. Your goals or financial circumstances may have changed and your portfolio may no longer accurately reflect your targets. Your advisor can help you evaluate whether or not you’re still on track to meet your goals and if you need to make adjustments.
Reflect and Look Ahead
Set aside time to review your financial plan and past year’s progress. Did you save as much as you intended? Do you need to catch up before the end of the year? Have any of your goals changed?
If you had trouble meeting your goals, you might consider adhering to a stricter budget. A budget is critical for staying on track with your spending. Make sure you take into consideration your goals, income, debt, and expenses to get an accurate view of your financial picture. Determine the amount you can spend per month and identify any areas where you can cut back on spending. If you’re feeling inspired, break your budget into categories as specific as you want them to be, such as monthly bills, mortgage, gas, and groceries. Set aside a reserve for miscellaneous and unexpected expenses.
Don’t forget to set fresh goals, as well. Remember, the more specific your goals, the better chance you have of achieving them.
Start the New Year Off Right
Do you have questions about last-minute financial actions you should take before 2017? Do you want to start the new year off in the best way possible when it comes to your finances? I’d love the opportunity to serve as your accountability partner and help you stay on track. From helping you set goals to reviewing your portfolio, I’m here to support you in your financial journey. If you are interested in getting off on the right financial foot, I encourage you to reach out to me for a year-end review. Set up an appointment with me today at (626) 529-8347 or email me directly at firstname.lastname@example.org. I’d love to see 2017 be your best year yet!
Ricky Biel, CRPC® is a wealth manager with Haydel, Biel & Associates, an independent financial advisory firm serving individuals and families near Pasadena, California. The firm was founded in 2004 by Chris Haydel and Ricky Biel with a desire to provide unbiased, client-centered, community-based financial advice. Together, they have built a practice that has grown into a family of caring, smart professionals committed to blending proven investment methodologies with creative financial technologies that make it easier than ever to accomplish your goals. They strive to keep things simple and fun to give their clients peace of mind and alleviate financial stress. HBA Wealth takes care of their clients’ needs first and foremost and goes the extra mile to make their clients’ finances grow. To meet and see how the HBA Wealth team may be able to help, contact them today at (626) 529-8347 or email Ricky directly at email@example.com.