As the year draws to a close, it’s time to ensure you’re making the most of your financial opportunities and setting yourself up for a prosperous new year. Here’s a comprehensive guide to finishing the year strong by maximizing your savings, reducing your tax burden, and keeping your finances in check.
1. Complete Your Yearly Goals
The end of the year is a great time to take stock of the goals you set earlier. Have you achieved your savings targets? Is your debt-reduction plan on track? This reflection ensures you stay focused and can celebrate the progress you’ve made.
2. Max Out Your IRA Contributions
If you have an Individual Retirement Account (IRA), now is the time to review your contributions. The 2024 limit for IRAs is $6,500 (or $7,500 if you’re 50 or older). Making the full contribution before the year ends ensures you’re maximizing this valuable retirement tool.
3. Contribute the Maximum to Your HSA
If you have a Health Savings Account (HSA), maximize your contributions if possible. In 2024, the contribution limit for self-only coverage is $4,150, and for family coverage, it’s $8,300. HSAs provide excellent tax advantages and can be valuable to your long-term savings strategy.
4. Use Up Non-Rollover FSA or Dependent Care Money
Flexible Spending Accounts (FSA) and dependent care FSAs usually have a “use-it-or-lose-it” policy, meaning any unused funds disappear at year’s end. Review your balance and plan to spend these funds on qualified expenses before you lose them.
5. Increase Your 401(k) Contributions
If you have some financial flexibility, consider increasing your 401(k) contributions for the remainder of the year. For 2024, the contribution limit is $22,500 (or $30,000 for those aged 50 or older). Increasing contributions now will help you take advantage of any employer match and reduce your taxable income.
6. Apply for Financial Aid if You Have a Student
If you have a college student in the family, now is the time to apply for financial aid. Submitting the FAFSA (Free Application for Federal Student Aid) and any necessary institutional forms early in the year can open up more aid options.
7. Consider Roth IRA Conversions if Your Income is Low
Consider a Roth IRA conversion if this year’s income is lower than usual. Moving funds from a traditional IRA to a Roth IRA during a low-income year could mean paying less in taxes and taking advantage of future tax-free growth.
8. Plan Your Holiday Spending Wisely
Avoid overspending by setting a realistic holiday budget. Factor in gifts, travel, and additional costs. By planning, you can enjoy the season without experiencing financial regret in the new year.
9. Consider Tax-Loss Harvesting (When Applicable)
Tax-loss harvesting involves selling investments at a loss to offset capital gains tax. If you have taxable accounts and experienced market losses, this strategy can help lower your tax bill, but be mindful of tax regulations and consult a professional if needed.
10. Open a New Credit Card for Rewards (If You’re Debt-Free)
If you pay off your credit card bill monthly, consider opening a new card to take advantage of year-end promotions or rewards. Many cards offer incentives like cash back or travel points, which can help offset holiday spending. Just remember to avoid accumulating debt.
These steps will help you maximize your financial potential, reduce unnecessary taxes, and ensure you’re heading into the new year with strong financial footing. By being proactive with your finances, you’ll be well-prepared to achieve your 2025 goals!
