5 Financial Steps Before the Year Ends

The end of the year can seem like a whirlwind, with family members to visit and holiday parties to attend. In between the celebrating, however, take some time to review your finances. By doing so, you can set yourself up for financial well-being when you ring in the new year.

Here are five financial steps to take before 2017 ends:

Create Your 2018 Budget

Review your spending over 2017, and ask yourself whether you stayed in line with your spending goals. If you consistently overspent, now is a good time to revamp your budget. While you are reworking the numbers, make sure to set aside money for bigger goals, such as vacations abroad. And if you need to reduce your spending, then the easiest target may well be your discretionary expenses—like your morning espresso or housecleaning service.

Set Aside More in Your 401(k)

In 2017, you can contribute up to $18,000 to your retirement account ($24,000 if you are 50 or older). If you have room to contribute and can afford it, then ask your employer about the rules for making a lump sum contribution, then make as large a contribution that you can feasibly afford. Remember that this is a step to take before the IRS deadline of December 31. And if you like to make New Year’s resolutions, then consider resolving to contribute enough in 2018 that you get your full company match, if you don’t already.

Review Your Investment Portfolio

If your taxable accounts had investment gains, then tax loss harvesting might be an opportune strategy to reduce or eliminate the taxes you would have to pay on those gains. With tax loss harvesting, you sell your losing investments to offset investment gains. Just be aware of wash sale rules. While you are reviewing your portfolio, consider whether it needs rebalancing and whether your allocations are diversified in light of your investment goals and risk tolerance.

Donate to Charity

Year-end is a traditional time to donate to our favorite causes. Just make sure you donate by December 31 if you want your next tax return to reflect your giving. If you have appreciated securities, you can avoid the taxes that you would incur in selling them. You simply give them to a 501(c)(3) charity instead, and you receive a tax deduction in the process.

Review Your Insurance

Consider making a review of your insurance policies a regular part of your year-end financial housecleaning. Take a look at the changes over the past year and the changes you anticipate in the new year. Then determine whether your insurance policies (such as life, homeowners, long-term care, and disability) address those changes. If not, call your insurance agent with any policy updates.