13 smart things to do before year-end
An hour of effort here and there before 2012 arrives can reduce your taxes, build your retirement savings and simplify your financial life.
This post comes from Brandon Ballenger at partner site Money Talks News.
Maybe you've been too busy to notice, but the year's almost over. So, in between shopping trips, holiday preparations and the daily grind, it's time to focus on some smaller things that might make a big difference after year-end.
In the video below, Stacy Johnson takes a look at some easy tasks that can make your financial life simpler -- and maybe cheaper -- next year. Check it out, then read on for more.
Maybe you've been putting off these tasks, or maybe they haven't occurred to you. But with 30 days left in the year, you can take out this entire list doing just one thing every day or two.
- Review your credit history. Time required: less than one hour. At AnnualCreditReport.com you can get a free copy of your credit report from each of the three major reporting agencies. Your credit history doesn't include your credit scores, but this is the information used to tabulate your scores, so you really need to check it for accuracy. Take 10 minutes to download it, then a half-hour looking it over to make sure all's well.
- Review your tax situation. Time required: one to two hours. The window for some tax advantages closes at the end of the year, so now's the time to look into possible credits and deductions, especially if you're close to another tax bracket. Start by pulling out last year's return, scoping out last year's deductions, and seeing if there are actions you can take now to swell this year's. Can you add more to your retirement plan at work? Can you take a deductible loss on an investment? Make a charitable donation? For more ideas, see "4 reasons to start thinking taxes now."
- Clear clutter. Time required: one hour to one month. There's no better time than the holidays to turn your clutter into cash, or at least a tax deduction. Pick one room, closet, or drawer per day, and spend a few minutes getting rid of stuff you haven't touched in a year or more. If it's easily sold, sell it online. If you'd rather help someone less fortunate, donate it. Either way, you'll end up with more money or more deductions, and less mess, and if you're lucky, maybe even a regift.
- Review/rebalance investments. Time required: less than one hour. Investments like your retirement plan shouldn't require a lot of maintenance, but they do require some. Take a look at how your investments are performing and decide whether it's time to buy, sell, or leave well enough alone. Check out "Manage your 401k in 1 minute" and the SEC's Beginners' Guide to Asset Allocation.
- Support a charity. Time required: less than one hour. It's the season for giving, not just because of good cheer, but also because of tax-deductible donations. It only takes a few minutes to check out charities. See "4 tips to find the right charity."
- Max out retirement contributions. Time required: less than one hourAccording to the IRS, the annual cap for IRAs (including Roths) is $5,000 for those under 50 on Dec. 31 and $6,000 for those older. You have until April to do this, but not so with your 401k at work. You only have until Dec. 31 to contribute the max: $16,500 if you're under 50, and $22,000 if you're over. Finding out how much you've contributed this year should only take a minute or two. Use the rest of the time to contact your HR department and set up fatter contributions through year-end.
- Spend your FSA. Time required: less than one hour. If you've set aside money in a flexible spending account, the deadline for spending it is usually Dec. 31. Some changes were made this year to how an FSA can be used. For example, most nonprescription drugs no longer qualify.
- Prepay bills. Time required: less than one hour. You might boost some tax credits and deductions for this tax year by prepaying things like your mortgage or next semester's college tuition. If these bills are due soon anyway, get a deduction by paying in advance. What's deductible? Look at last year's tax return.
- Find a financial adviser. Time required: one to three hours. There's someone out there who can help you with most of the things on this list, and a lot more -- a financial adviser. Check out "How to find a financial adviser." Also check out "9 things financial advisers won't say."
- Tinker with your budget. Time required: one to two hours. Now is a good time to look at whether your spending has matched your projections over the past year. Maybe some adjustments are in order, especially if your income or expenses have changed. If your budget is busted or you don't have one, check out "5 steps to building a budget that works."
- Change important passwords. Time required: less than one hour. A lot of sensitive personal information is one smart guess away from being stolen. Add an extra layer of protection by changing your most important passwords at least once a year. A good password has a mix of numbers, letters and special characters, but as this XKCD comic strip shows, length is more important than complexity.
- Digitize documents. Time required: one hour to one month. If you're buried in paper, maybe it's time to invest in a scanner. You can get a decent one for $50 and start transferring the contents of your filing cabinets and drawers to your computer. Just make sure to keep backups. We suggest some options in "5 tips for paperless finances." Trying to figure out what to keep? Check out "7 tips for spring cleaning your finances."
- Make a will. Time required: less than one hour. As Stacy explains in "How do I get a will on the cheap?" lawyers can cost hundreds but do-it-yourself software is less than $50 and you can do it in less than an hour. If you have the time and money, have your computer-generated will checked by a lawyer. But anything's better than nothing.
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