As we slide right on into the end of the year, you may be tempted to think that between holiday parties, shopping for gifts, and end-of-year work deadlines, there isn’t time to focus on your finances. The holidays can be a hard time to cut back and make large financial jumps, but there is a handful of smart money moves you can definitely take care of before 2018 ends!
Max Out Your 401k
For employer-sponsored 401k plans, the deadline to make any contributions is December 31st. While the annual contribution limit is $18,500 (plus $6,000 in “catch up contributions” if you’re over 50), and it is nice to shoot for that amount, it’s most important to annually contribute the amount that gets you an employer match (if your workplace offers it.) For example, some employers match somewhere between 3-6% of your annual salary if you put it in the 401k.
While it may seem impossible to make a large contribution during the expensive holiday season, remember that if you don’t get the employer match, you’re leaving free money on the table, and no one wants to do that. Ideally, moving forward into 2019, you’re making these contributions on a monthly basis so the end of the year doesn’t sneak up on you!
There’s also two pieces of good news – those with IRA’s have until April 15th to contribute for the prior year. Also, in 2019 both 401k and IRA contribution limits will increase to $19,000 and $6,000 annually, respectively.
Check Up on Your Health(care) Coverages and Spending
Before the end of the year, review your health insurance coverage. Do you have a health savings account (HSA)? If so, consider moving money over to an HSA to reduce your taxable income for the year. These balances do roll over, so it’s nice to have the extra savings cushion for any unforeseen healthcare expenses – with the added tax benefits.
For those with Flexible Savings Accounts, those balances do not roll over, so squeeze in those vision, dental, and doctors appointments before the end of the year so as not to let this money go to waste.
Make a Debt Action Plan
Paying off large swaths of debt during the most expensive time of the year is difficult. Instead, set yourself up for financial success in 2019 by limiting credit card spending during the holidays (don’t go into any more debt) and creating a debt payoff action plan to kick off on January 1st.
Tally up all your debts, how much you can pay off each month, and ways you can make extra money. Using this information, you can calculate how long it will take to pay off the balances. My favorite tip is to set rewards in advance and gift yourself around 5% of each paid off balance to keep yourself motivated for the long term. Setting rewards in advance does a lot for keeping people motivated while paying off debt, and preventing debt fatigue.
Set Your Financial Goals for 2019
Did you set financial goals for 2018? If so, now is the time to review your progress and see how you did. Take an hour on a Sunday afternoon, or wake up an hour earlier on the weekend to spend this important time with yourself. If you hit your goals for the year – fantastic! If not, brainstorm on where things may have gone wrong, or where you could have improved.
Whether you’re new to financial goal setting or you do it every year, use the rest of the time to brainstorm what you’d like to accomplish (financially) in the year ahead. Do you want to max out your retirement contributions? Save up to pay for your annual vacation in cash? What about holiday savings for next year so you don’t have to rely on credit to get through the holiday season?
Put it all down on paper. Calculate how much you’ll need to contribute each month to meet those goals. Tweak as necessary until you get a goal plan you feel is realistic and that you can stick to. Hopefully by goal planning in advance, you won’t wait until the last minute to make the bulk of your savings contributions at year’s end.
Automating Your Savings Goals for 2019
I’ve listed this as a separate year-end action item because it does take time to set up processes to enable financial success.
Look at your goals – if there’s anything you need to do to make sure these financial goals happen (checking with HR to make sure you’re contributing the monthly amount to get your employer match or setting up automated savings, for example) take the time during the slow week between Christmas and New Year’s Eve to tackle these to-dos.
This way, come January 1st you’ll be ready to start the new year with a fresh financial slate!