If 2020 has taught us anything, it’s to be prepared for anything and everything. This mindset should also extend to your finances. Here are some end of year financial planning steps you should take to ensure you start 2021 on the right foot.
It’s never too early to start preparing for next year’s taxes. A you start receiving important end of year documents, keep these in a safe and secure place. Take a look at your taxable investments as well as ant charitable donations you made during the calendar year. Check your withholdings to make sure everything is correct.
MAX OUT CONTRIBUTIONS
Whether it’s your 401K or your HSA, putting as much money as you can towards these accounts now will pay off in the future. This will also allow you to take advantage of any employer matching offers that are available to you. Contributions can be made until December 31st.
Having money set aside for the sole purpose of an emergency not only will provide peace of mind, but help prevent unnecessary credit card debt. While it has been recommended having at least three months’ worth of expenses tucked away, having any amount is a great start.
PAYING OFF DEBT
While making minimum payments may help prevent interest and late fees, it’s not the most effective way to pay off debt. If you find yourself with a little more money, thanks to a bonus or an upcoming raise, come up with a plan to divert some of these funds towards your debt.
Start thinking about what you hope to achieve next year when it comes to your finances. Make SMART, tangible goals that have a clear timeline that you can track. By creating goals, you will be able make other financial decisions knowing what you hope to achieve.