For many people, the last few weeks of the year are all about shopping for gifts, wrapping presents, decorating the Christmas tree, baking cookies, planning Christmas dinner, going to holiday parties and figuring out how the heck you’re going to spend New Year’s.
But there’s something else that needs to be done before the end of the year: reviewing and wrapping up your finances!
Help Squad consulted with Ruthe Schwartz, a financial coach and the owner of her Deerfield-based financial planning and insurance advisory firm, Money In Motion.
Schwartz gave us 8 financial tips on what to do and review before Dec. 31. It’s advice that will not only give you financial protection you might need, but it could give you the gift of extra holiday money!
1. Rebalance your portfolio:
This year particularly, stocks have been up. Therefore, the balance of your portfolio has most likely changed. Take a look at the percentages of your investments in each asset category and make sure they still fit your financial goals. For example, if you had 50 percent of your assets in stocks and 25 percent in bonds, the increase in value might have changed those percentages.
2. Consider letting go of investments that are showing a loss:
You might want to sell an investment that is trading at a loss for the purpose of reducing your taxes. It can offset taxes from some gains you have made on other investments.
3. Establish an emergency fund:
If you don’t have one already, establish an emergency fund that could cover at least six months of expenses if you need it. Make sure the money is easily accessibly in the form of a fairly liquid type of low-risk investment (such as a money market fund.)
4. Give a tax deductible charitable contribution:
Before December 31st is a great time to give a monetary gift to a cause you really believe in. You can write off the donation on your taxes, and at the same time feel good about helping an organization in need.
5. Claim your energy efficient property tax credit:
Did you know that if you purchase residential alternative energy equipment such as solar hot water heaters, solar electricity equipment, including washers and dryers, or even a solar roof, you might be eligible for a tax credit worth 30 percent of the purchase price and the labor? Talk to your accountant if you’ve purchased any of this equipment. Also, the credit is good every year until 2016!
6. Spend down your Flexible Savings Account:
Need some new eyeglasses? How about a cleaning at the dentist? Now’s the time to get in those last minute appointments and use up the rest of your flexible spending dollars for 2013. All plans are different, but a lot of plans require you to “use it or lose it.” Also, if you have medical bills that need to be paid which were not covered by your insurance, pay them before December 31st with your flexible spending dollars!
7. Buy an electric or plug-in hybrid car:
If you’ve been considering buying a hybrid vehicle, you might want to do some shopping before the year’s end. If you buy one, you could be eligible for a tax credit of up to $7,500!
8. Review your insurance policies:
The end of the year is a great time to review your insurance policies and make sure your loved ones are protected if anything happens to you. Have you had a life change, such as a new baby, a job status change, a marital status change, an illness? Consider all these things and decide if you might need more insurance. Also, this is a great time to gently review with parents or elders the benefit of long term care insurance. This is an area of investing that is often overlooked and can make a huge difference in their life, as well as yours.