Don’t wait until January to get your bottom line back on track.
As we wrap up 2015 look back at the resolutions you took at the beginning of this year. If any of them involved your personal finances, did you follow through with them? If not, consider these year-end financial strategies to ring in the new year with a bang instead of a whimper.
Strategy #1: Max out your employee contribution
If you are an employee of a group or hospital which has established a 401k or 403b plan, the deadline for you to max out your 2015 employee contribution is 12/31. Look back at your pay stubs and see how much you’ve contributed in the first 11 months of the year and then project your December contribution. If it falls short of the maximum, change your percentage contribution ASAP before your last paycheck of the year.
Strategy #2: Increase your cash reserves
Your credit card bills will almost certainly be higher in January – after all, your family and friends think you’re a rich doctor so you can’t just give them gifts from Walmart. But those bills are like pimples on an elephant’s back compared to the cash you’ll need for other much bigger obligations looming.
These include federal and state estimated tax payments for 2015 – the last one is due by 1/15. Then when the tax season goes into full swing, you may have to cough up more money in April to pay off 2015 taxes. And then you’ll get hit again at the same time for your first estimated tax payment of 2016.
On top of that if you’re an independent contractor you can still make 2015 retirement plan contributions in 2016 – depending on your situation these may be due by April as well.
Point is: pump up your bank account now so the first few months of 2016 are a breeze.
Strategy #3: Get your portfolio back in balance
It’s been a roller coaster year for several investment classes and your portfolio might be out of whack. You should be rebalancing your portfolio year round rather than just choosing an arbitrary date. But if you haven’t done that, then look at your overall portfolio, including all accounts you own, and figure out how far off you are from your desired target allocation. Then make the appropriate trades to get back to that desired allocation. And one more thing – if you have losses in a taxable account, consider selling for a loss before year end to claim the loss on your tax return.
Bonus Strategy: Work more shifts!
Didn’t I tell you to work more shifts last month? If you did, then you may have the cash flow to max out your 401k contribution this month (strategy #1) and use the extra cash to get your portfolio back in balance (strategy #3). If you work more shifts this month, then you’ll have more liquidity next month (strategy #2).
Do all of that and you’ll be well ahead of the curve when the ball drops on New Year’s Eve.
