As the end of the year approaches, it’s time to ensure your finances are in good order and set yourself up for success in the coming year. These seven financial to-dos should be on your list.
Review Your Auto Insurance Coverage
Most people stay with the same insurer year after year. Particularly if they combine it with home or other insurances for a promoted discount. However, if you haven’t shopped for auto insurance in the past three years, you might want to look around.
Even if it turns out that you are with the least expensive company, you may be able to save money by changing your coverages and deductibles.
Look for Unclaimed Funds
Did you know there’s money hanging around, just waiting for someone to claim it? It sounds crazy, but it’s true. Approximately 1 in 10 people have unclaimed cash or property. Each state has an unclaimed funds department that tries to reunite money with the right person. So check to see if you have unclaimed funds. It only takes a few minutes and might be a nice bonus for you.
Review Your Withholdings
Take a look at how much you’re withholding on each paycheck and make sure it’s enough using the IRS’s withholdings calculator. This will help prevent an unexpectedly large tax bill next year. Then, if necessary, update your withholdings on your W-4 form.
Correct Mistakes in Your Credit Report
Each year, everyone is allowed one free credit report (the pandemic has changed this to more frequent access, so it’s easier than ever to check and correct your credit report). So December is the perfect time to review yours and correct any errors.
If you need to correct an error, specific instructions and templates help make the process easier.
Freeze Your Credit Report
Identity theft is an ongoing issue. If you’re not actively searching for a loan or other credit, the best way to protect yourself from someone fraudulently opening credit in your name is to freeze your credit. With credit freezing and unfreezing now completely free, it is suggested that people should take this precaution. You can find out more here.
Make Pretax Contributions to Retirement Accounts
Pretax contributions lower your taxes. How it works varies depending on the type of account.
401(k): Most people do not reach the maximum allowed in their 401(k) contributions. You can make adjustments to your paycheck withholdings for next year. In 2021 the maximum allowed was $19,500. In 2022, it was $20,500, and in 2023 the limit increased to $22,500.
IRA: If you don’t have a 401(k), an IRA is an excellent way to set money aside for retirement. You can also set one up if you have extra money you’d like to put towards retirement after hitting the maximum 401(k) amount. If you’re under 50 years old, you can put up to $6,500 and $7,500 if you’re 50 or older in an IRA each year.
HSA: If you have an HSA (Health Savings Account) as part of your health care plan, be sure it’s fully funded. The maximum amounts vary based on the type of coverage. This chart will help you find the maximum for your situation. In addition, HSAs are the only savings-type plan with three tax benefits. The contributions are pretax, earnings are tax-free, and withdrawals are not taxed.
Donate to Charity
Charitable contributions to qualified organizations can offer significant savings on your taxes. The more you donate, the more you can deduct. In-kind donations count as well. You will need a bank receipt or other documentation to keep with your tax paperwork in case of an audit.
How many of these items are on your December financial to-do list? Like what you see? Sign up for our biweekly newsletter!