14 smart money moves to make before the end of the year

It's a really busy time, I know. But when Suba Iyer told me about how she closes out her year financially, I thought it would be of interest to the readers of Get Rich Slowly. So I asked if she would prepare an article and share her list with us – but in reviewing it, it appears she made it even more comprehensive! Suba currently writes for FiveCentNickel.com.

The new year is just around the corner. How was your 2014? Did you get everything you wanted to accomplish done? Are you getting ready to set new resolutions? Before you do that, spend a little time to finish 2014 with a bang. Here are some money moves you can make in 2014, whatever is left of it, to make full use of the current year and get set up to start the new year off on the right foot.

  1. Maximize your retirement contributions: If you have not contributed the maximum to your retirement accounts, now is the time to tighten your financial belt and contribute as much as possible. The 401k, 403b and 457 plans have a $17,500 limit if you are under 50 and a $22,500 limit if you are over 50. IRAs have a limit of $5,500 if you are under the age of 50 and a $6,500 limit if you are over 50. If you are self-employed, you will also need to open your Individual 401k by December 31. You will have until April 15 of next year to contribute, but the account has to be set up by the end of this year. If you are a stay-at-home parent, you can open a spousal IRA and contribute the maximum allowed based on your spouse's income.
  2. Rebalance your portfolio: Now is a good time to check on your investment portfolio and see if you need to rebalance it. Over the course of the year, due to the changes in the market, the portfolio allocation might not be what you want based on your risk tolerance.
  3. Start your tax return and decide what moves you can make to minimize your taxes: It is always beneficial to start the tax return (based on your current paystub you can figure out the end of the year number roughly). This will help you decide which tax moves (#4 through #7 below) to make before the end of the year.
  4. Make your charitable contributions: From a pure financial point of view, will it be beneficial to make most of your donations in the year 2014 or push them to 2015? We take the standard deduction one year and itemized deductions in the next; so for us, pushing the donations to the itemized deduction year will make the most sense for our taxes. If you want to reduce your tax liability in 2014, you have to make your donations by December 31. Also, if you have any stock that has appreciated well over the years and you want to sell that without paying a big capital gains tax bill, consider donating the appreciated stock. You don't have to pay the tax and you can deduct the entire appreciated amount.
  5. Defer income (and taxes): Similar to the point above, if you are freelancer, you might be able to defer your income if you are trying to reduce your tax liability for this year. If you cannot defer income, can you defer (or advance) paying your other deductible taxes like property taxes?
  6. Take your minimum required distribution: If you are over 70 ½ years of age, you have to take the required minimum distribution (RMD) from your 401k or IRA before the end of the year — otherwise, you will get a penalty bill from Uncle Sam. If you reached age 70 ½ this 2014, you have until April 1, 2015, to take 2014's RMD.
  7. Harvest tax losses: If you have a big capital gains bill, you might be able to reduce your tax liability by getting rid of some of your holdings that are trading well below what you paid for them (if you think they won't recover).
  8. Declutter your house: With all the entertaining you will be doing, you might already be on a decluttering spree. But it provides more advantages than a clean house. Set the stuff you don't want aside and drop it off at a Goodwill or similar organization to get a tax break by claiming the donations.
  9. Open a college savings plan: With college costs rising every year, any savings is better than none. Open a college savings plan and contribute as much as you can. As a bonus, you can share the college savings plan information with the grandparents so they can contribute to it as well. As of 2014, 34 states and the District of Columbia offer state tax deductions for contributions to a qualified 529 plan.
  10. Review the benefits you get via your employer: It is probably open enrollment season for many employers. Now is a good time to check out your HR website to see all of the discounts and savings you are eligible for (other than the major health insurance and retirement benefits). For example, if you are eligible for free gym access, that is something you can eliminate from your budget. Make a list of all the discounts that you can use and put it next to your computer so it's easy to check throughout the year.
  11. Review your health insurance plan and your 2014 health spending: Open enrollment season is also the best time to review this year's health spending. How much did you have to pay out of pocket? Is there a plan that will better suit your needs? What are the limits of your current plan? Have you taken advantage of those limits and fulfilled all of your medical needs? For example, you might be eligible for an extra pair of glasses before the year ends. Based on the review and your new plan, also see if you are eligible for a Flexible Spending Account. Figure out how much money you can set aside every month for your next year's needs. If you are hoping to get insurance via the Healthcare.gov open marketplace, the open enrollment started on November 15.
  12. Use up your Flexible Spending Account: Use it or lose it. If you have any money left over in your FSA, depending on the plan, you might have to use it before the end the year. Check you plan's deadline and make a plan to use up all the money.
  13. Do a self appraisal (career and personal): Even if you don't have to do an appraisal at work, I recommend doing it anyway. It serves three purposes: First, when it is time to ask for a promotion or raise, you will have a list of accomplishments ready; then, when it is time to look for a new job, it will be easy to update your resume by just collecting all the previous year's appraisals. Another thing to consider is whether you are happy with what you accomplished this year at work and make plans to improve next year. As far as a personal appraisal is concerned, evaluate whether you accomplished all the personal goals you set for yourself. If you didn't, can you identify why?
  14. Change your passwords: While this may not be considered a traditional money move, you may want to do this nonetheless, given all the hacking of bank accounts and credit cards in the news. It is a good idea to change all your passwords regularly anyway, and the end of the year is a good time to do it.

What smart money moves are you making before the ball drops?

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Nick @ Millionaires Giving Money
Nick @ Millionaires Giving Money
5 years ago

Great post Suba! Never thought of the idea of closing the year with smart financial moves. I think its a great idea and it gives you clarity and vision for 2015. I love these ideas, thanks for sharing. BTW the password idea is great, there have been a number of times I have been hacked and lost an awful lot of productivity as a result.

I would also recommend backing up all work on a Cloud Drive and USB just to avoid nasty hard drive issues.

Thanks for sharing.

Beth
Beth
5 years ago

I highly recommend setting up regular back ups. (I do my weekly at work and home). Came in handy when I had a hard drive issue!

For people like me who don’t want to upload their information to the Cloud, I keep a backup of my files in a safe deposit box. A physical back up of your computer won’t help if there’s a fire or natural disaster in your home.

Suba @ Wealth Informatics
Suba @ Wealth Informatics
5 years ago
Reply to  Beth

Good point! I have everything set up to auto backup so didn’t think of that. I should check to make sure everything is getting done as it should. Thanks for the reminder!

Beth
Beth
5 years ago

All good tips! This year, I’m reviewing my TFSAs. There’s this funny little rule where if you withdraw from your TFSA, you have to wait until the next calendar year to replace the money. December’s a good time to switch it from one bank to another because you don’t have to wait long to put it back. Some banks let you withdraw without paying a free but will charge you if you transfer your TFSA to another bank.

Jenny
Jenny
5 years ago
Reply to  Beth

Thanks, Beth, for this great reminder to wait until the next calendar year to replace withdrawals – I think a lot of people inadvertently run afoul of that rule. It was my understanding, however, that any financial institution would facilitate direct (and free) transfers from one TFSA to another? If you simply withdraw your funds from institution A and deposit to institution B, your deposit will be capped at the cumulative contribution limit, such that you lose the ability to recontribute any earnings you’ve achieved. As a result, you lose the important benefit of continued tax-free growth on those earnings,… Read more »

Daniel
Daniel
5 years ago
Reply to  Jenny

It was a good point that if you are considering moving your money within the TFSA from one institution to another that doing so at the end of the year is the best time because of the rules about waiting until the next January so you won’t lose out on very much potential gains. As for the question you asked about the fees, any financial institution that’s holding YOUR money (let’s not forget, it’s yours and you can choose whomever you want to hold it for you) not only can but must move it if you tell them to do… Read more »

Petrish @ Debt Free Martini
Petrish @ Debt Free Martini
5 years ago

Some of these tips I haven’t even thought of this is great. For next year I plan on finally starting a savings account for my daughter and I plan on using all of my taxes to pay down debt. Hopefully next year I can max out my 401k and also live a debt free life. All great tips. Thanks

Daphne
Daphne
5 years ago

Hello! I just discovered your website and think it’s great! I have one question: You stated “We take the standard deduction one year and itemized deductions in the next”. What is the advantage to that? Did you explain your approach in a previous post? Thanks!

Suba @ Wealth Informatics
Suba @ Wealth Informatics
5 years ago
Reply to  Daphne

It makes sense for some people. For example, if you donated to charity and the difference between your standard and itemized deductions was small, you might want to consider donating every other year. Here is an example to explain this better: Let’s say you donated $12,000 to charity in 2012 and again in 2013. Let’s additionally assume that both years you opted to take itemized deductions. The total deduction for 2012 and 2013 is $24,000. Now, instead, let’s assume you set aside $1,000 each month in 2012 and donated the entire $24,000 in 2013. You take the standard deduction for… Read more »

Syed
Syed
5 years ago

Awesome tips. It’s key to find out if you will end up taking the standard deduction or will itemize. I’ve seen some friends try to ramp up year end charitable contributions only to find out that they were going to take the standard deduction anyway.

AB
AB
5 years ago

Handy set of reminders, but… Whenever I read “maximize your retirement contributions” I think “hahaha wouldn’t that be nice?” Perhaps if I were more comfortable with treating my Roth IRA as part of my emergency fund I could do this, but I’d really rather have 9-12 months of expenses covered in a dedicated fund. And as a 1.1-earner family, that’s a slow build up. I already move a percentage of each paycheck into my IRA (and get a great match on my employee-sponsored account, too) but force-feeding my retirement account at the expense of other things would be foolish. Of… Read more »

Suba @ Wealth Informatics
Suba @ Wealth Informatics
5 years ago
Reply to  AB

AB, we are one income too and we actually have ROTH IRA as part of our emergency fund 🙂 We have 6 months in accessible cash but I didn’t like the idea of that much money sitting with little to no interest (we have a total of 12 months + extra money for 3 international flight tickets due to our family living overseas). On the point of maximizing retirement, I didn’t mean you have to do it at the expense of your other savings. We try to cut eating out (our weakness) and try to cook/bake more at home. We… Read more »

Jeffrey
Jeffrey
5 years ago
Reply to  AB

Budgeting for the following year should be done in December so that you can plan to put money always for retirement and for a rainy day fund on a monthly basis. Scrambling at the end of the year is not a model for proper saving.

Emily @ Simple Cheap Mom
Emily @ Simple Cheap Mom
5 years ago

Great tips. year end is a great time to get your finances together, figure out well you’ve been doing and make changes for the future.

Liette Séguin
Liette Séguin
5 years ago

nice tips. It’s helpful and informative.

Liette Seguin
Liette Seguin
5 years ago

nice article, It’s informative and helpful

The Uncommon Cent
The Uncommon Cent
5 years ago

Great tips! Year end planning always makes for a great new year. Sitting down to evaluate what worked and what didn’t opens your eyes to what habits you should continue and which you should cut. I love it! Keep it up!

Mathieu Lebrun
Mathieu Lebrun
5 years ago

it’s really a great tips. I’m always broke before holiday or year end.

Michelle @ The Holistic Wallet
Michelle @ The Holistic Wallet
5 years ago

I love #13! Doing appraisals of the past year are great. I also enjoy looking back on the past year’s spending trends, budget performance and savings/debt repayment accomplishments and to see what I did well and what still needs a little work.

DealForALiving
DealForALiving
5 years ago

Thanks for these reminders – less than a month to get these done.

Fred
Fred
5 years ago

Normally when I see list articles, I can always come up with one or two more tips. This is a first; I don’t have any additional ideas; you’ve covered everything; you wrote a great article. However, I do have one non-financial year-end suggestion, change the batteries in your smoke alarms.

Grace @ Investment Total
Grace @ Investment Total
5 years ago

I love this article. It makes me reminds how to become a money smart individual. I like to do the following before the end of the year; have to review my net worth, plan to renew my insurance and have plan to increase my cash flow.

Casey
Casey
5 years ago

One more thing ~ request your free copy of your credit report!

Dianne
Dianne
5 years ago

To maximize my 5% rebates on my two credit cards I jot down which card is offering more on gas, groc, etc in each month and put it in my wallet for the year, so I can use credit to my advantage, and plan ahead well.

Sandra Mercier
Sandra Mercier
5 years ago

Thank you for sharing the article. It’s very useful. Hope to hear more from you.

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