3 Things to do Before the End of the Year

For many, the end of the year is a time of reflection.  The optimists among us look back on their experiences and think about how much they’ve accomplished over the previous year.   The pessimists among us look back on their experiences and think about what they didn’t achieve.  However, whether you’re an optimist or a pessimist, there are three things you can do before the end of the year to lay a foundation for financial success for next year.

1. Consider funding your FSA.  Simply explained, an FSA, or Flexible Spending Account, enables you to use pre-tax money to fund health care expenses.  (Think co-payments for your doctor, dentist, and optometrist visits as well as prescriptions for medications).  During your open enrollment period at work, if your employer offers an FSA, you can elect to defer up to $2,550 of your 2016 pre-tax salary to pay for health care costs which you expect to incur in 2016.  Why is this important?  If you incur $1,500 of health care costs next year, it’s better to fund it with $1,500 of your pre-tax money rather than needing to earn $2,000, pay $500 in taxes* and have $1,500 left over to pay for those expenses.  If done properly, funding your FSA can save you money!  Be careful not to defer too much though because any money which is not used in 2016 is lost (it’s “use or lose” for the calendar year).  Therefore, it may be better to defer too little rather than too much. 
2. Allocate more of your year-end bonus to your 401k.  Assuming that you are told when your year-end bonus will be paid, you may have the ability to contact your payroll department and defer more of that money to your 401k rather than have it paid out to you.  Although that means having less of a bonus check to spend today, it also means paying less in taxes on that bonus as well as having more money set aside for retirement.  Oftentimes, employees are just informed that they’ll get a bonus, but many never think to invest more of that money in their 401k.  In fact, some aren’t even aware that deferring more of that money to their 401k is even an option.  If you haven’t been able to contribute as much to your 401k throughout the year as you would have liked, here is a great opportunity!  Check out this link on the cost of procrastination to learn why you should consider funding your 401k with some additional dollars.  http://bit.ly/1MTM8MG
3. Plan out what savings goals you want to achieve in 2016.  In order to have a successful 2016, your goal planning for savings should begin now.  Doing so prepares you to start Day 1 of 2016 with a focused path on how you will achieve your goals.  Oftentimes, too many people wait until the new year to start thinking about what they want to achieve, and while they may still have a successful year in savings, waiting until January to start thinking about it cuts into the amount of time and ability to save, especially if they’ve spent too much money on items they didn’t really need during the holiday sales.

As always, contact me with any questions or for help.   You can either email me or fill in your information in the "Have a Question?" box located on the left hand side of my website.  Have a great 2016!