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Year End To-Dos For Your Finances

4 December 2015 in Investing Insights

Although it’s not New Year’s yet, it’s never too early to think about taxes and managing your money. There are many actions you can take before year-end to save, get organized, shape up your investments, and minimize how much you could owe the government in taxes this spring.

Ready to work on getting your finances in optimal shape? Cross these to-dos off your list before the year is up.

Review Your Insurance Plans Thoroughly

Open enrollment is in full swing – make sure you don’t miss your company’s deadline! Utilize this time to do a thorough review of your medical, dental, vision, life, disability, auto and home insurance policies.

If you recently got married, had a baby, or started caring for an aging parent, you may want to consider modifying your insurance coverage to better fit your new lifestyle. The plan you’ve been on this year simply may not be the most cost effective or extensive policy for you and your family in 2016.

Tally up how much you have spent in the last couple years on insurance premiums, claims and out of pocket expenses. It’s quite possible you overestimated how much coverage you needed and were fortunate not to have any claims. On the other hand, costly and unexpected events could have caught you unprepared and pushed you over budget. No one can perfectly predict how much insurance they’ll need.

However, reviewing your lifestyle, health, driving habits, number of dependents and prior claims can help you personalize your policies to be a great fit. Hopefully you won’t need to frequently use your insurance, but it’s great peace of mind knowing that it’s there for you when you need it most.

Don’t Lose Any Precious Paid Vacation Days

An employee benefit that is gaining popularity at many Bay Area startup companies is unlimited vacation days. Sounds too good to be true, right? The pros include not having to worry about the hassle of tracking vacation accrual balances and being able to take as many days off as you want. The catch is many employees find it difficult to ask for a lot of time off in these pressured environments.

If your employer offers traditional accrued vacation benefits, as most do, make sure you fully understand their rollover policy. Some companies enforce accrual caps that limit the amount of days you can carry at any given time or rollover into the new year. Double check your balance and don’t lose any precious paid vacation days before the year is up. Even if you don’t want to travel, taking a staycation is a great way to recharge and de-stress.

Submit All Of Your Expense Reports

Did you take a business trip, entertain a client, purchase study guides, or host a team-building event recently? Don’t forget to submit all of your expense reports before the year is up. Check your wallet, desk drawers, work bag and car compartments for any loose receipts that need to be expensed. If you wait too long and miss your employer’s cutoff, there’s a chance you could wind up stuck holding the bill!

If you’re a business owner, you may want to consider shifting some expenses you would normally pay in January or February into the month of December, which could lower your company’s tax liability for 2015.

Check Your Flex Spending Account Balance

For close to 30 years, health were subject to a use it or lose it rule. This meant that if you didn’t use up your account balance by year end, you were forced to forfeit whatever money was remaining in your account. Fortunately, the government modified this ruling in 2013 for the benefit of roughly 14 million families with health FSA accounts. Now, the rules allow employers to offer one of two options: carry over or grace period.1

The carry over feature lets employees roll forward up to $500 of unused funds indefinitely, or by a deadline set by the employer. The grace period option provides employees with up to two and a half months following year-end to use up any remaining funds, without a monetary cap. Make sure you fully understand what your employer’s policy is and use any of your remaining FSA funds accordingly. Don’t lose money you’ve already contributed because you were not familiar with the rules.

Confirm Your Employer Has Your Current Contact Information And Tax Status

Did you change jobs this year or move to a new home? Don’t forget to update all of your contact information with both your previous and current employers. In addition, if you got married, divorced, or have a new number of dependents, make sure to submit a new W9 to your employer as well. These lifestyle changes can affect how much tax you should withhold from your paychecks and any tax forms you need to file with your returns.

Taking a few minutes now to make sure your information is correct can save you a lot of running around and headaches later. It can be difficult and time consuming tracking down missing tax forms and trying to get corrections made and reissued.

Consider Contributing To Charity This Holiday Season

Feeling generous this holiday season? Get a tax deduction while you’re at it. Make a donation to a qualified charity before December 31st in order to claim it as a deduction from your 2015 income.

Retain receipts for all of your contributions and keep them in one place for easy reference during tax time. If you donated $250 or more to a single charity, ask for written confirmation of the date and total value of your contribution.

Other tips to keep in mind include filling out form 8382 if you have more than $500 in charitable deductions when you file taxes, and to get an independent appraisal if you donate valuable property worth more than $5,000.2

Pay Your Property Taxes On Time Or Prepay

Depending on where you’re located, you might have a property tax deadline coming up this month. States that have due dates in December include Alabama, California, Kansas, Kentucky, Louisiana, Missouri, New Hampshire, New Mexico, Oklahoma and Virginia.3

Make sure to pay any property taxes due by the deadline or you could face steep penalties and fees that could have been easily avoided. Even if your property tax deadlines have come and gone, you could elect to prepay your 2016 installments this year if you want to increase your 2015 deductions.

Maximize Your Retirement Contributions

The average American is not saving enough for retirement. Are you? If you haven’t set a goal to max out your contributions each year, your retirement accounts aren’t reaching their full potential. The current maximum 401(k) contribution set by the IRS is $18,000 for 2015.

Even if the maximum contribution level were to stay static, you could accumulate nearly $1.8 million in 40 years if you max out your 401(k) every year. Be sure to submit your last round of 401(k) contributions before your final 2015 payroll is processed. Cutoff dates vary by employer, so check with your HR Manager for details.

If you don’t have access to a 401(k), you still have time to contribute to a traditional or Roth IRA account. Maximum contributions for 2015 cannot exceed $5,500 for those aged 49 and under or $6,500 for people 50 and over. Remember, even if you’ve already reached the contribution maximums in your retirement accounts this year, you can still continue to save in your non-retirement accounts.

Consider Cutting Your Losses

It’s pretty remarkable how successful investors like Warren Buffett have made so many profitable trades over the years. But famous investors are human and make trading mistakes too. After all, nobody can accurately predict how the markets will react 100 percent of the time.

Try not to get discouraged if some of your investments aren’t turning out the way you hoped. If a stock price has declined a great deal, waiting for it to rebound can become an opportunity cost. Nobody likes to lose money, but sometimes you may be better off cutting your losses and moving on.

An advantage of cutting your losses before the year is up is claiming them as a deduction on your income tax returns. Capital losses first offset capital gains of the same type (ex. sales of short-term stock held less than one year). Next, they offset any capital gains of the other type (ex. sales of long-term stock held more than one year), and lastly they offset other income.

Currently, $3,000 is the maximum limit you can claim in stock losses per year. However, any remaining losses can be carried forward to future years until the entire loss is claimed.4

Keep in mind you can’t claim a stock loss if you repurchase shares of the same investment within 30 days. Doing so is called a “wash sale,” which isn’t allowed for tax deduction purposes.

Rebalance Your Investment Accounts

If you can’t remember the last time you rebalanced your investment accounts, they’re due for a checkup. Take a look at your allocations and see if they have shifted out of your target range.

Rebalancing motifs in your Motif Investing account is as easy as a few mouse clicks. The motifs in our catalog are periodically reviewed to help ensure they continue to reflect their original investing ideas. We just rebalanced over 60 motifs as part of our November Quarterly Rebalance. Log in to your account to check whether professionally built in your portfolio have a rebalance available and consider adding funds if you’d like to increase your position.

We automatically alert you when updates become available as well. It only costs a total commission of $9.95 to rebalance a motif, and the choice to rebalance is entirely up to you. Read more about the benefits of rebalancing on our blog.

Open An Account With Motif Investing Today

Why wait until 2016 to start investing and improving your finances? Stay ahead of the curve and put your cash to work now. Open a free account with Motif investing in just a few clicks and get started today.

What other tips do you have for wrapping up your end of year finances? Did we miss anything? Share you own tips and comments below.

Revision was made to the wash rule to be 30 days instead of the originally stated 60.

Motif Investing does not provide tax, legal, or estate planning information.

1 The U.S. Treasury, “Treasury Modifies ‘Use-or-Lose’ Rule for Health Flexible Spending Arrangements,” The U.S. Department OF the Treasury, October 31, 2013.
2 TurboTax, “How Does Your Charitable Giving Measure Up?” TurboTax, 2015.
3 POER, “2015 Property Tax Calendar,” Marvin Poer And Company, 2015.
4 Internal Revenue Service, “Publication 550: Investment Income And Expenses,” Department Of The Treasury, February 12, 2015.

Tags: rebalance, 401k, FSA
  1. Kevin
    7 Dec at 3:13 am

    Thanks for the rebalancing reminder. I’ve been meaning to do that for several months and kept forgetting.

  2. Gary
    9 Dec at 7:14 pm

    Believe you meant 30 days on the wash sale rule.

  3. Rob
    29 Dec at 11:04 pm

    I maxed out my retirement contributions and paid all my property taxes. I’m working on my last expense reports next. December has gone by too fast.