The end of the year is a great time to review your finances and make sure you’re on track to meet your financial goals. Here are some key steps to take before the calendar flips to 2025:
First, use up any remaining funds in your Flexible Spending Account (FSA). FSAs are typically use-it-or-lose-it, so spend that money on eligible items like contact lenses or prescription drugs before it disappears on December 31.
Next, max out your retirement account contributions. Put as much as you can into your 401(k) or IRA to take full advantage of annual limits and reach your savings goals faster. Consider making a charitable donation.
Not only is it rewarding to give back, but you can also write off cash contributions on your taxes, potentially reducing your taxable income. Review your insurance policies to make sure you have the right coverage for your current needs. Life events like marriage or having a child can change how much insurance you require.
Rebalance your investment portfolio to keep it aligned with your goals. Aim to have 3-6 months of expenses in an emergency fund first, then diversify across stocks and bonds. A financial professional can help determine the best strategy for you.
Year-end financial planning tips
Update your beneficiaries on insurance policies and estate plans. Make sure your list reflects any changes in your life, like new family members or adult children.
Take advantage of current interest rates. Consider a high-yield savings account to grow your money faster, or lock in a CD rate before they drop further. Look into refinancing high-interest debts to pay them off sooner.
Think about converting a traditional retirement account to a Roth IRA. With a Roth, you contribute after-tax money but can withdraw tax-free in retirement, potentially saving you a lot over time. If you’re 73 or older, don’t forget to take your required minimum distributions from retirement accounts to avoid penalties.
Finally, set some financial goals for the new year. Aim to pay off debt, stick to a budget, fully fund your emergency savings, and determine a comfortable monthly savings amount. Taking these money moves now will start 2025 off on the right financial foot.
If you have questions, consult with a trusted financial professional to make a plan tailored to your unique situation and goals.
