5 Money Moves to Make Before 2014

money moves

As the year draws to a close in a whirlwind of holiday events, trips and work deadlines, it’s easy to get caught up in the holiday bustle and overlook your finances. But a bit of financial housekeeping now can help you get on track for 2014 and beyond. Here’s a look at five money moves to make before the end of the year.

1. Revisit your retirement plans

Look at how much you’ve contributed to retirement over the course of the year and see if you can afford to increase your contributions or make an additional lump sum contribution to lower your taxable income for the current year. Jason Hull, owner of Hull Financial Planning in Fort Worth, Texas, compares each year’s retirement contributions to a departing plane. “If you don’t max out your contributions, you’re leaving that opportunity behind,” he says. “It’s also a good time to increase next year’s contribution. Fill out the paperwork and bump it up by a couple of percentage points.” You need to make 401(k) contributions for the current year by December 31, but you have until April 15 to contribute to an IRA.

2. Use up money in your FSA

If you have a flexible spending account (FSA) for dependent care or unreimbursed health care costs, you’ll want to check your remaining balance and plan to use up that money by December 31 (or March 15, if your employer offers a grace period). The IRS recently amended its rules on FSAs so that you can carry $500 into the following year assuming your employer’s plan allows carry-overs. But you can contribute up to $2,500 to an FSA per year, so if you have more than $500 left, now’s the time to schedule doctor’s appointments or stock up on medication. Anything left in your account is forfeited.

3. Review your spending

Whether you need to pay down debt or pad your emergency fund, a new year presents an opportunity to start new financial habits. That’s why Hull recommends looking at your 2013 spending, especially on unanticipated costs like car repairs or last-minute gifts, and making a plan for 2014. “Occasionally you’ve got to pay your property taxes or take the car in for maintenance,” he says. “People who don’t prepare wind up having to whip out the credit card. Look at your spending throughout the year so you can plan for irregular expenses in 2014.”

4. Make charitable contributions

Nonprofits ramp up their fundraising efforts at the end of the year when donors are feeling the holiday spirit of giving and also looking for ways to lower their tax liability. In fact, thousands of nonprofits and donors annually participate in Giving Tuesday, a grassroots campaign the Tuesday after Thanksgiving designed to kick off the holiday fundraising season similar to how Black Friday kicks off holiday shopping. If you’re planning to donate to charity during this holiday season, Hull suggests making a donation in person if you can, because “it will make you feel psychologically richer.” Be sure to get a receipt or acknowledgement letter, too.

5. Plan how you’ll use a tax refund or bonus

Before you get a year-end bonus or a tax refund in the spring, think about how you’ll use that money so you won’t spend it mindlessly. “If you don’t plan you’ll end up spending it and look back later and regret your decisions,” Hull says. Depending on your situation, you might use that money to fund an IRA or pay off credit card debt. Alternately, you might invest in yourself and your career. “Is there a class you can take that will get you a certification that will get you a raise at work?” Hull asks.

Photo: 401(k), Flickr

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Published December 9, 2013 Updated: December 18, 2013
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