If you want to build momentum for your New Year's money resolutions, set some financial improvements into motion before the end of the year.
Here are six easy-to-implement steps to help boost your net worth going into the new year.
1. Mind your health insurance deductibles
End-of-the-year financial planning strategies aren't always this well-timed: "My son's birthday is December 29th. His due date was actually January 2nd," says Stacia Williams. "I begged my OB/GYN to go ahead and induce me."
She knew her due date was close enough that the doctor could be flexible. And she also knew her insurance deductible would reset on Jan. 1, meaning she’d have to pay out of pocket as she began meeting the new year’s deductible.
"That saved us a ton of money," Williams says. "He was my least expensive child!"
Williams is a founder of and a wealth advisor with the Williams Financial Group in Kansas City, Missouri, so she knows about such things. Suppose you've met your annual deductible or are close. In that case, you might want to schedule expensive medical procedures before the beginning of the new year, when your deductible resets and your out-of-pocket expenses could be much higher.
2. Use or lose your FSA balance
Being smart about your money often begins with employer-sponsored retirement, insurance and health benefit programs, says Marc Scudillo, a CPA and certified financial planner with EisnerAmper Wealth Management in Iselin, New Jersey.
He says many early-career workers have high-deductible health insurance plans combined with some type of tax-advantaged health savings account, such as a flexible spending account.
Many of these employer-sponsored health savings accounts are "use it or lose it," Scudillo says. If there's a balance still in the account by year-end, you may forfeit it. Some accounts have grace periods of a couple of months or so, and some allow you to roll over at least a portion, if not all, of the balance into the new year.
Either way, you'll want to review that balance and your options before you end up having neither.
3. Plan holiday spending
Williams says budgeting for holiday expenses is a must so that you are confident you're spending disposable income and not dipping into money needed to cover the necessities. That can be as sophisticated or simple as you're comfortable with — from a spreadsheet to an app that helps track your spending.
She is also a fan of cash-back rewards and interest-free credit card promotions to help pay for holiday expenses ("it's almost like layaway"). Just be sure to calculate the payment that will be due so that you're confident you can pay off the balance before the interest-free period ends. And keep an eye on your credit limits; having more than 30% of a card’s limit in use can start to hurt your credit score. But your score will rebound as you pay down the balance.
Williams recommends holiday savings accounts when planning for next year. Some financial institutions offer incentives to open such accounts.
"That way, next year, your holiday budget is pretty much already set, and you can add to or take away from that," she says. While these savings accounts don't pay much in interest, it's simply an automatic way to fund your holiday spending ahead of time.
4. Prepare now for tax time
"I always make my CPA earn her keep," Williams says. She does that by having her tax advisor send her a list of receipts and documents to gather that will be needed for her particular tax situation.
She also suggests using an app to scan and organize receipts rather than stuffing them into an envelope or a box. It makes the gathering process "manageable and easy."
Gig economy earners should also be aware of tax breaks and write-offs that they qualify for, Scudillo says — and have the receipts to back them up.
5. Monitor your credit
Monitoring your credit history and score is especially important this time of the year when fraud often seems to be on the uptick.
"You can be proactive by downloading a free credit tracking app," Williams says. She says any errors or discrepancies should be reported to the credit bureaus.
6. Keep your life-after-work goals in mind
Check retirement plan limits and see if you can kick your contributions up a notch or two.
"One year-end review that we often see with younger professionals is that they get a bump in their compensation over the course of the year — but did they also bump up their savings?" Scudillo asks.
He suggests seeing if your employer offers an automatic annual deferral increase to its 401(k). Often called an automatic escalation feature, this lets you increase your employee contribution by a set amount each year, for example, 1% annually.
"We highly recommend that because it takes away that human inertia that people fall into," Scudillo says. We often "delay, procrastinate or forget" to increase savings as our earnings grow.
"I think a lot of times we don't ask enough questions," Williams says. She says people barely like looking at their retirement account statements, let alone calling and asking questions about how to invest. If your employer offers a 401(k) plan, the investment company that sponsors the plan can be an excellent — and free — source of advice.
Scudillo has one final tip: If you don't have financial goals, set them.
"If we had a certain targeted amount that we wanted to save over the course of the year, review: Did we get there? And if not, why not?"