20 year-end money moves you can make right now
The new year is right around the corner, and many people are thinking about their 2015 resolutions. Maybe you hope to lose a few pounds, improve your eating habits or explore a new hobby. You might even include a few money resolutions on your list. But you don't have to wait until Jan. 1 to get your personal finances on track; there are plenty of smart things to do with your money before the end of the year.
1. Set goals: Many people complain about their financial situations throughout the year, but never take steps to improve. December is the perfect time to sit down and reflect on financial goals for the upcoming year.
"Think long-term and ask yourself, 'What life goals and lifestyle do I want to achieve? In what time frame? What do I need to do to get there?'" said Elle Kaplan, CEO and founder of LexION Capital Management. "By taking a proactive approach and taking charge of your finances, you can change your reality."
2. Break a costly habit: It only takes one or two costly habits to derail your financial goals. Identify habits that are draining your budget and replace one with a frugal alternative. "Make a resolution to change at least one money-sucking habit," recommended Rachel Blank, author of "The Day Tradette." "For example, resolve to pack your lunch twice a week instead of eating out. It could save you up to $600 per year."
3. Start attacking credit-card debt: Credit-card debt isn't going to eliminate itself, so stop wishing for less debt and come up with a plan to make it go away. If you can successfully break a bad money habit, use the savings to start paying down credit card balances, Blank said.
4. Make an extra mortgage payment: One extra principal mortgage payment a year not only reduces how much you pay in interest over the life of the loan, it helps pay off the mortgage sooner and build equity faster. If you receive a sizable year-end bonus or gift money, use the cash to make an extra principal-only payment.
5. Talk money with your partner:
In addition to setting personal financial goals for the upcoming year, you should also discuss and revamp household finances with your partner. If you overspent last year, or didn't save enough, come up with a new plan before the end of the year and start fresh in 2015.
6. Change passwords: Whether you use online banking or pay utilities online, it's smart to periodically change your passwords. Make it a goal before the end of the year to change your passwords and keep your information safe.
7. Evaluate health insurance: If your insurance is set to expire at the end of the month, don't renew without reevaluating your coverage. Situations change, and you need to make sure that you policy provides adequate coverage. This also applies to other types of insurance, such as life, renter's and auto.
8. Start an emergency fund: A cash cushion isn't a luxury, it's an absolute necessity. And if you're getting gift money or a year-end bonus, you can use this cash to jump start or add to your financial safety net.
9. Consider itemizing: It's never too early to prepare for tax season. Before the end of 2014, decide whether or not to itemize your upcoming return. If you do, there's time before 2015 to maximize your write-offs and lower your taxable income, if necessary.
10. Make a year-end charitable donation: If you decide to itemize, make a charitable contribution before the end of the year. You can donate anything from money to automobiles. Donations over $250 must include a receipt, per guidelines set by the Internal Revenue Service.
11. Check your credit reports: Identity theft is one of the fastest growing crimes, yet many people never check their credit reports (that's right, you have more than one). Don't wait until you suspect a problem to order your reports. "Make sure to obtain an annual copy of your credit card report from each credit card rating agency," said Coleen Pantalone, Associate Professor of Finance at Northeastern University in Boston. "Scan the report for unusual charges in order to protect against credit card fraud." Reports from the three major bureaus are available free once a year at annualcreditreport.com.
12. Max out your 401(k): If you're age 49 or under, you can contribute up to $17,500 to your 401(k) in 2014. Contributions are made pre-tax (and taxed upon withdrawal) so a last-minute contribution can reduce your taxable income and potentially save thousands in federal income tax. Make your contribution before Dec. 31.
13. Contribute to an IRA: Additionally, you can make contributions to a traditional IRA to enjoy additional tax savings in retirement. "Technically you have until April 15 to make such contributions, but don't procrastinate," recommended Bill Hendricks, CEO and co-founder of Common Form Inc. "Start setting aside the money now if you don't already have it, and contribute before you file your taxes."
14. Automate your finances: Make preparations to put your personal finances on autopilot starting in January. Discuss the option of direct deposit with your employer, enroll in automatic bill pay with your bank and set up recurring transfers to effortlessly increase the balance on your savings account.
15. Lower your mortgage rate: There's no way to predict with accuracy when mortgage rates will increase, yet some experts forecast rates around 5 percent by the end of 2015. To take advantage of low rates before they rise, discuss refinancing with your lender. A lower rate can potentially lower your mortgage payment and total interest paid.
16. Harvest tax losses: If an investment lost money in 2014, sell before 2015 to offset capital gains tax liability. "In particular, if you can sell it before having held it for a year, you can use that short-term capital loss to offset other short-term capital gains," said Colin Drake, founder of Drake Wealth Management.
17. Compare utility rates: You might have the option of choosing your energy and/or natural gas provider. Shop around and compare rates offered by different companies to save on utility costs such as electricity, gas, cable, Internet and phone.
18. Use up your FSA: Money in your Flexible Spending Account can pay for insurance co-pays, medical exams and other medical expenses. However, in most cases, if you don't use this money by the end of the year, you lose it. If there's a balance, schedule your annual doctor visit and ask if you can use funds for alternative treatments, such as acupuncture or chiropractic care.
19. Give the gift of knowledge: Don't wait until it's too late to instill good money lessons in your children. Whether they're preteens or young adults, teach age-appropriate lessons and they'll start off the new year financially savvier.
20. Splurge: Between paying bills, saving money and dealing with unexpected bills, there might be little room for fun in your budget. Don't let the year slip away without treating yourself. It doesn't have to be expensive — simply a fun, low-cost splurge for a job well done.