Budgeting, Charity & Giving, Investing, Planning, Retirement
Most Americans have one thing on their minds this time of year: how to make next year even better! Although we may take a moment to look back on the past 12 months and celebrate our big “wins”, it’s still healthy to look ahead toward growth and improvement. One thing you might be thinking about “leveling up” next year is your finances. But I have a secret for you:
You don’t have to wait until January to get started.
You can start making some amazing year-end money moves right now that will set you up for success in the new year!
Do An Annual Financial Review
To know where you’re going, you need to know where you’ve been. Look at the goals you’ve set, and whether or not you’ve achieved them. If you did – congrats! Do you need to set more advanced goals for next year? If you didn’t – what got in your way? Did unexpected expenses crop up? Did you experience a major life change? Or were your goals unreasonable? You should also evaluate your budget, where you stand with your current debts, and your net worth statement. Do all of these feel like they’re still in line with your goals for next year?
Update Your Budget
No matter how much things seem to stay the same, something changes every year. People change jobs, get engaged, welcome a new family member, or buy a new house. Any number of things can happen throughout the year, which means evaluating and updating your budget should be an annual exercise. Accomplishing your goals starts with setting a realistic budget. Evaluate some of the big things you spent money on and ask yourself, is there a way you could cut back on certain expenses? Can you cut costs entirely to make room for other priorities? Now may be a good time to renegotiate rates, especially car insurance and cell phone bills.
Where Is Life Taking You?
Do you have any big expenses coming up in the next 12 months? This might mean you’re:
- Purchasing a home
- Starting your family
- Getting married
- Changing jobs
- Starting your own business
- Moving out of state
- Buying a rental property
- Refinishing part of your home
- Planning a big, exciting trip
Whatever your big plans are for next year, make sure you’ve thought through the financial side of them, too!
Spend Down Your FSA
Whether you have a health-focused FSA or a Dependent Care FSA, now is the time to use it or lose it! Some employer-offered flexible savings accounts require you to spend all the money you’ve accumulated over the year before December 31. Don’t let this money slip through your fingers simply because you didn’t visit the doctor enough. Not sure what you can spend your flexible savings account on? Check out this list of approved expenses.
Check Your Investments
As we close out the year, it’s time to check out your portfolio and evaluate its performance. This year had some ups and downs, so you could have either gained or lost money this year. Depending on your situation, discuss with your tax professional or Certified Financial Planner and see if it would benefit you to do tax-loss harvesting. If you do decide to sell some of your investments, the end of the year is also a good time to ensure your portfolio is balanced with a diversified mix of investments. Again, how you balance your portfolio will depend on your situation, and your tax professional or CFP can give you more guidance.
Fund Your Retirement Accounts or HSA
You only have until December 31st to max out your workplace retirement accounts (like a 401(k)) or your Health Savings Account. If there’s a little extra wiggle-room in your annual budget, now is the time to make it happen!
Give Back
While most Americans won’t be itemizing their taxes under the new tax law, many of them still will be considering whether or not to give to charity this time of year. Although your donations aren’t deductible if you don’t itemize next filing season, that doesn’t mean you shouldn’t give back! Many of us have more than enough and, at the end of the day, giving to a charity or organization you’re passionate about is a fantastic way to spend your excess wealth. An added benefit is that charitable giving is emotionally fulfilling – meaning you may be less likely to overspend in other areas of your life as a result of being philanthropic!
Automate What You Can
Are your bills paid automatically each month? Do you have automated contributions to your retirement or savings accounts set up? How about automated extra payments toward your debt? When we have to manually decide to make financially wise decisions, we’re way less likely to follow through. Give yourself a leg-up for next year and automate everything you can before December 31st.
Talk to a Financial Planner
The best way to get organized for next year is to get in touch with a financial planner. A financial planner can help you to:
- Map out your short and long-term financial goals
- Set up automated bill payments, savings, and extra debt repayment
- Organize your budget
- Figure out what financial roadblocks you’ve faced in the past, and how to navigate around them in the future when they crop up
- Invest your funds in a way that aligns with your financial goals and personal values
Sounds pretty great, right?
If you’re ready to take the next step in your financial life next year, I encourage you to reach out!
Charity & Giving, Debt, Goals
We all want to give. Generosity tends to be an inherent trait, and even the stingiest curmudgeon probably has a soft spot deep down for a good cause. The question is that when it comes to making an impact in the lives or causes of others, what can you afford to give? Time or money?
The reality is that being charitable or having the desire to do so can do a wonderful thing for the world, but can also be a murky area when it comes to our finances. We don’t always have enough money to give freely, and those with extra-busy schedules can barely imagine how to fit in the time to volunteer for a cause. As generous as we may want to be, these restrictions can leave us asking: how?
Chances are, you have the ability to give something. Whether it’s a day at a food drive or a respectable donation, the will to give will lead the way. Read on to find out how.
Time
While many people wish they could write a check to their favorite organizations, volunteering time can often be a suitable substitution. There are plenty of ways that money can help a non-profit, but time can often be harder to procure.
Some groups require that you sign up for regular shifts or not volunteer at all. If you can work it in as part of your schedule, a recurring time can be more fulfilling than going to a soup kitchen once a year. Plus, it can help you develop new friendships, learn a skill or even network.
The Harvard Women’s Health Watch said that volunteering regularly can boost your mental and physical health. If you don’t have a lot of time to give, try focusing on organizations where you can help sporadically.
Different groups will have different time requirements, so be sure to understand how you can give before you sign up. There’s no point in running yourself ragged trying to meet expectations if the organization isn’t a good fit for your schedule.
You can also tell volunteer coordinators what your availability is and see if they can make a recommendation for you. Not every volunteering option will be a possibility, so don’t be afraid to keep looking, but ensure it’s for a cause you care about to ensure you’re pursuing something you value as well.
Money
Donating to charity is not only a personal decision for many people, but it’s also a financial one. Determining whether or not you can afford to give to charity depends on what your other goals are. For example, if you want to retire early, charitable donations may have to wait. If you’re stuck with thousands in debt, donating may also set you back.
However, if you have a comfortable income with relatively low or manageable expenses, you can probably make a significant difference without sucking your bank account dry. A financial planner can help you decide if you fit in that category, and show you the best way to funnel your money towards the causes you care about.
Here are some basic guidelines you should follow before you start allocating money toward charity:
● Emergency fund: The emergency fund is the basis of your finances. Before you give to others in need, you need to ensure that you won’t be the one asking for help. An emergency fund is something you use when your transmission goes out, when you have an ER visit or when your mother dies unexpectedly. Make sure you have at least the beginning of an emergency fund built up.
● Debt: If you have student loans, credit card debt or car loans, it’s better to pay those off before going big with giving to charity. Small monthly contributions or even bigger annual contributions are okay as long as they are worked into your budget on a consistent basis and you’re not going into debt to give. Debt payments decrease your ability to save and spend as you choose, so the sooner you pay them off, the more financial freedom you’ll have.
● Retirement: Flight attendants tell you, “Put your own mask on before helping others.” It’s the same with retirement and charity. Before you help others, help yourself. Save between 10-15% of your salary for retirement and then feel free to donate.
Before you donate anywhere, use GuideStar to find an organization with a solid, trustworthy record. That will ensure that your dollars go to people who need them, instead of flashy galas and under-the-table kickbacks.
Saving, Taxes
If you’re someone who receives a tax refund, the sudden surge in cash, no matter how large or small, is sure to put a smile on your face. You overpaid your taxes for the year and now you have some extra money you weren’t necessarily expecting. So, what do you do with your tax refund? Here is a list of 20 smart money moves you can make with your tax refund:
1. Start or add to your emergency fund It’s always a good idea to have rainy day money for the ‘just in case’ moments in life.
2. Put it towards something you’ve been saving for Maybe you’ve been saving for a large purchase like a car or new technology. Your tax refund may not cover all of it, but it can certainly help you save up for that big-ticket item a little faster.
3. Pay down a debt If you have credit card debt, this is exactly where your tax refund should go. Get rid of those high interest payments first!
4. Make a home improvement Home improvements can increase the value of your home and your level of enjoyment in your home. You can definitely use a tax refund to tackle that landscaping project, put in those French doors or put it towards any home improvement project you’ve been dying to get to.
5. Give it away to a charity Giving money away to your church or a cause you believe in is a wonderful way to use your tax refund and may become a tax write off on next year’s return.
6. Invest it in your business Own a business? This extra surge in cash can be put towards new equipment, software, inventory or something else that can make your business run more efficiently and be more profitable.
7. Buy something you want (within reason) Although not the most financially savvy option, it’s ok to splurge on yourself every once in a while when you’ve been working hard to save and tackle debt.
8. Make an extra mortgage payment Making extra mortgage payments help you pay down the principal amount of your loan faster, reducing the length of your loan and interest payments.
9. Have an experience Buy an experience with your tax refund instead of an item. Experiences create memories that have much stronger lasting gratification than a shiny new toy.
10. Buy someone a gift If you’re the generous type, show someone you care about them by buying them a gift just because.
11. Invest in yourself Prioritize your own personal and professional development by investing in your growth.
12. Open a Roth IRA If you haven’t opened a Roth IRA yet, you can use your tax refund to open one now. I like how these retirement accounts work and recommend them even if you already have a 401(k).
13. Save it for your child’s education Open or make a contribution to a 529 plan that specifically allows you to set money aside for education purposes.
14. Pay it forward Next time you’re at Starbucks, pay for the guy or gal in line behind you. Spreading goodwill and good cheer is an excellent use of money any time of the year.
15. Host friends and family Invite everyone over to your place and host a get together! Fun times all around and you won’t worry about dipping into your regular grocery budget this month.
16. Update your wardrobe Use a portion of the money to add one or two staple pieces to your wardrobe.
17. Re-energize your health Join yoga, Pilates or a gym. Try purchasing a couple of workout DVDs or spending a few extra dollars on healthier items at the grocery store. A healthier you could translate into reduced costs for medical expenses over the long term.
18. Visit friends or family Not everyone lives close to their friends and family. Maybe you can take that trip upstate or buy a plane ticket cross country to spend some good quality time together.
19. Be extra generous Give your mailman or garbage man a tip, leave a little extra for the waiter, buy an extra box of Girl Scout Cookies!
20. Do a little bit of everything Typically, I recommend a 50 / 30 / 20 allocation: 50% towards debt, 30% towards savings and 20% towards a splurge on yourself. This gives you the best of all worlds and ensures you’re putting the money to good use! What are you planning on spending your tax refund on this year? Tweet me @marybstorj!
