The majority of individuals are getting ready for traveling, gift-giving, and finishing up work responsibilities. However, a few critical financial issues must be solved before the year concludes. This article will cover six end-of-year financial tasks that should be at the top of your agenda. So, let’s finish this year strong and head into the new year in good financial standing.
Utilize Your Contributions to the Fullest
Now is the moment to evaluate your 2022 retirement account contributions and ensure you've maximized them all if you can. Your 401(k) is the most essential of your funds. If you want to contribute the maximum amount towards this tax-advantaged account, you have until December 31. If you have not already, simply submit any further contributions before the year's conclusion.
You have slightly more time if you also want to max out your standard or Roth IRA. According to the IRS, you can invest in these accounts up to the yearly maximum until next April's tax deadline. This indicates that you can keep adding funds until April 15, 2023. However, if you don't intend to reach your 401(k) contribution threshold for the year, you should invest enough to take full benefit of any company match your employer may offer you. Failure to do so is throwing away free money.
Plan to Put an End to Your Debt
Are you buried in student loans or credit card debt? How should you get started? With holidays approaching us fast, it could be presumably challenging for individuals, as it’s also likely the period in which you spend the most. With presents, trips, and your regular bills, it's easy to dig a bigger hole than before. Now is the moment to put a stop to debt accumulation and develop a strong plan as a strategy to get out of debt. If you haven't saved sufficient funds for the holidays, perhaps this is the year to start cutting back. Whatever you do, make this the time when you don't rack up credit card debt with presents and vacations. Make it your year-end objective to avoid incurring any new debt, and create a strategy to get out of the debt you're already in as soon as possible, beginning in January.
Have A Financial Family Meeting
A report with your family should surely be on your year-end financial checklist. Now is the moment to sit down and discuss how you did this year and where you are today. Finish the conversation by discussing your objectives for the upcoming year. You may also talk about new objectives you want to create for yourself and your family and how you plan to reach them. Credit, credit score, capital gains, and losses are all examples of this. You should cover the following topics in this discussion:
Budget: What it was in 2022, if your family adhered to it, budgeting tactics (and whether they succeeded), and what the budget should look like in 2023.
Savings rate: What you planned to save, how much you really saved, and what must be altered for next year.
Cutting costs: If your household is overspending for some items (such as utilities, smartphones, and groceries), how to reduce those payments?
Big-spending plans: If any major purchases are in the future, as well as any adjustments you need to make for preparation (for example, getting credit scores in order for a new mortgage or preparing for a down payment).
Of course, each household's circumstance is unique, but the concept remains the same. This meeting is not only beneficial but also necessary. When you talk about money with your spouse and older children, you guarantee everybody is on the same path. If you have data in front of you, you're more likely to make meaningful changes than when you create high objectives that seem nice but aren't specified or practical. It's easy to have broad financial intentions during the year, such as saving more money or purchasing a home. These objectives, however, can quickly become forgotten in the daily commotion.
You may increase your chances of accomplishing your goals by sitting down for an hour each December to discuss the status of your family finances. Spend time calculating your expenditure, gathering data from the last 12 months, and analyzing your costs. Then, as a family, pull up your pants and tackle your 2023 financial plans.
Contribute to Charity
Now is the opportunity to write a check or donate old personal items to your favorite organizations. If you itemize your deductions, you may include gifts to registered nonprofit organizations on your taxes; just make sure you acquire a receipt or retain a copy of your canceled check or online payment for all donations.
Take Your Mandatory Withdrawals
Once you reach the age of 72, you must immediately take your required minimum distributions from your IRAs. Because of the epidemic, the requirement was suspended in 2020, but it was reintroduced for 2021. If you fail to make the mandatory minimum distribution this year, you may face a 50% penalty. Assume you're meant to withdraw $100,000 by December 31 but don't. You may be required to pay $50,000 in penalties and regular income tax on the $100,000.
Consider Using Your FSA Funds
Did you realize that your FSA (Flexible Spending Account) is the type of account you must use, or you will lose it? That's true, if you don't spend the money on qualified costs each year, you forfeit it. FSAs are tax-free accounts used to pay for things like dependent (child) care and medical bills like deductibles and medication. You can contribute up to a set amount via your salary each year and use the money to pay for qualified expenses using pre-tax dollars. Other businesses can give their employees a grace period of up to 2.5 months, giving them a few additional weeks to spend the money on qualified costs.
Check to see what sort of FSA you have, how much money is in your account, and the amount you need to spend to prevent losing your hard-earned money. If you just have a limited amount of time to spend your money, here are a few suggestions to get you started. This is also a good opportunity to arrange your FSA contributions for the next year. Did you deplete your bank account in 2022? Do you anticipate having medical bills that you did not have in previous years next year? If this is the case, appropriately modify your FSA contributions for the next year.
Schedule A Consultation with an Experienced Financial Advisor
We hope this article has been both helpful and informative. However, if you still feel like you need more guidance, we’re here to help. Here at Fourth Avenue Financial, our first priority is your overall financial success, no matter what life events come your way. We want to help you develop, implement, and monitor a strategy designed to address your individual situation to ensure all your investments are setting you up for a path of financial success. If you are ready to start planning for your financial future, we are here to help. Contact us today at (304) 746 7977 to schedule a meeting with one of our experienced financial advisors or schedule online: https://calendly.com/fourthavenuefinancial/introductory-zoom.
Securities are offered through J.W. Cole Financial, Inc. (JWC) Member FINRA / SIPC. Advisory Services are offered through J.W. Cole Advisors, Inc. (JWCA). Fourth Avenue Financial and JWC/ JWCA are unaffiliated entities.