On the STA Money Hour, daily at 12pm on 950AM KPRC in Houston, we have talked several times about how to better plan for your future. Towards year-end, it is a great time to get organized to start next year on the right foot with the right plan! Below, I have listed some steps that you can take to get your finances ready by year-end.
Also – don’t forget to spend a little time talking with your CPA and Tax Team related to any Year-end Tax Planning ideas after the Republicans (hopefully) pass their new Tax Plan.
- Start to get your budget under control
- Review Credit Card Statements and/or Bank/Debit Card Spending
- Start using Quicken or Mint.com to track expenses
- Start giving yourself a weekly “cash budget” vs. going to ATMs (and stop using non-free ATMs)
- Determine Strategy to pay down debt (and work into budget) – Order
- High Interest non-deductible
- High Interest deductible
- Lower interest
- Note: Feel good about yourself…find a way to pay off lowest balances first and DON’T CHARGE WHAT YOU CAN’T PAYOFF GOING FORWARD!
- Review your FICO Score – see if you can get it improved (myfico.com or other services)
- Plan for discretionary spending items like vacations and Christmas spending and work into budget NOW vs. at time of event.
- Plan to save for longer term goals like new house or vacation house
- Consider refinancing your house if not done already (keep eye on interest rates – up almost 0.50% in last several weeks).
- Update your W4 if you are getting to large a refund or had a surprise tax owed.
- Review at the credit cards you are using to consider:
- Lower interest rates if you carry a balance (see FICO comment as well)
- The Rewards offered – based on usage, more rewards/miles?
- 0% Interest on balance transfers – but track and be careful!
- In your budgeting, don’t forget to determine what you can put into employer plan:
- At least do match
- If not maxing, increase by 1%-2% and work into budget
- Medicare (and ObamaCare) Open Enrollment – are you in the right plan for your needs (healthcare utilization, prescription drugs, change in family situation)
- Employer Open Enrollment for Benefits – Have you picked the right plans?
- Enough Life Insurance
- 401k investments and deferral
- Does HSA Plan make sense?
- Review Your Portfolio – Has it performed to your goal “Hurdle Rate” and benchmark (not necessarily S&P 500). Given outlook are you properly allocated to stocks, bonds or cash.
- Determine, if available Roth vs. Traditional IRA/401k (lower the tax bracket, more Roth makes sense)
- If you are in retirement and/or low income year consider a Roth Conversion. This would need to be done by December 31st (if wrong can always “do over” recharacterize).
- Social Security Maximization Strategies (as you approach 62, FRA and age 70) – maxing with spousal and/or survivor’s benefits.
- Meet with a financial planner to see where you are in terms of your retirement (are you on track) – meet with a fiduciary (not just product pusher), fee-based, CFP, CPA/PFS, etc.
- On Track – Change savings, Hurdle Rate, Goals
- Pension/Social Security Maximization
- Risk Management
- Retirement Budget
- Optimized Tax Distribution Plan in Retirement (like STA’s R.I.T.E Plan™)
- Start college savings plan
- UTMA, 529 Plan, Pre-Paid college plans – START EARLY
- Review and assure year-end 529 Plan distributions (match expenses to distributions)
- Review available Tax Credits/Deductions (many have income limitations)
- Student Loan interest
- American Opportunity Credit
- Lifetime Learning Credit
- Research available grants and/or other financial aid.
Other Planning – Tax, Estate and Risk Management:
- Review your Estate Plan and get a Will done – best if with an attorney, but if you can’t afford an attorney right now, consider online services like LegalZoom (it is better than nothing).
- Sit with your insurance agent:
- Do you have enough life insurance (when considering work)?
- Have you considered or do you have disability and long-term care Insurance?
- Are there in your property-casualty coverages (car, home, umbrella, professional, etc.)?
- Review your 2015 Tax Return and Meet with Tax Team:
- Review these Year-End Tax Planning Basics.
- Consider year-end Charitable Planning – if needed and desired consider Donor Advised Fund (especially if you want to give a lot for tax planning and have not identified charities)
- Review your portfolio’s tax situation and consider Year-end Tax Loss Harvesting and “Tax Placement” changes between your retirement and taxable accounts
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