Thursday, December 29, 2011

End of Year Money Checklist

"Money often costs too much."
-Ralph Waldo Emerson
The year is almost over and year-end is a great time to give yourself a financial checkup. The website TheDigeratiLife recommends 16 Money Moves For Your Year End Financial Checklist.

1. Check your Credit Report - you can request a FREE report once a year from Equifax, Experian, and TransUnion. The website makes this easy to do. Watch out for sites that claim to offer a free credit check but also sign you up for a fee-based service.

2. Review your expenses for the year - are you over budget? Do you have a budget? Do you know how much you spent?

3. Evaluate your financial plan - do you have a plan for paying off the mortgage and other debts, for building up an emergency savings account? Did you meet the goals of your plan?

4. Get all medical/dental check-ups done before year-end. With most insurance plans, the insurance deductibles reset at the start of the new year, so you'll pay in full for any doctors visits in 2012 until you reach the deductible again.

5. Spend your FSA - if you have a Flexible Spending Plan for medical expenses then you must spend it or lose it. Some plans have a grace period of up to 2 1/2 months. Know your FSA deadline for spending.

6. Review your insurance claims for the year - is everything OK?

7. Add something to an IRA

8. Contribute to 529 plan for your kid's college

9. Give money to your kids - some gifts to kids can be tax deductible up to federal limits. Check out the rules for this.

10. Prepay tax deductible expenses - I'm not a fan of this one. By paying early you're taking from next year's deduction to help this year.

11. Review your investments like stocks, bonds and mutual funds

12. Sell investments for tax purposes. If you sell a losing investment in this tax-year it can help offset the taxes for investments that made money. Think carefully about this. Unless the investment is junk that you want to get rid off, personally I'd hold on to it and hope that it recovers instead of locking in the loss. Or hold on to it and sell in a tax year where I have huge gains elsewhere.

13. Defer buying mutual funds till next year. Mutual fund companies are required by law to pass on any fund capital gains to their investors. If you buy in December you'll get a tax bill for the gains made in 2011 that you missed out on by buying late in the year.

14. Make your annual charitable donations

15. If your 70 1/2 or older be sure to take money out of our IRA to meet minimum distribution requirements

16. Prepare for a year-end bonus. If you're lucky to get a bonus, how will you spend it wisely?

Bottom Line

Read the Digerati article in full because some of the suggestions above are very tricky and can backfire if done wrong or without the help of a financial planner.

One thing I would do differently is check my credit history at three different times of the year from Equifax, Experian, and TransUnion. Why get three reports at the same time when you could get one report in Jan, one in May and one in September instead?

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