Optimizing Your Finances Before Year-End | Stewardship Concepts Financial Advisors

2023 was a very interesting year for the stock market and the world. As we are coming toward the end of the year, it can be a great time to evaluate and make sure your finances are in order. Having intentional moments to evaluate your financial health is crucial for enhancing your hitting your long-term goals. Here are some vital steps you can take before the end of the year if you don't have a Spokane financial advisor:

Maximize Your Savings

Ensure that your savings are working for you effectively. If your savings account yields don't return 4%, it's time to explore alternatives. My top recommendations for clients include Wealthfront and Ally Bank, both of which offer competitive interest rates.

Protect Against Inflation

It's essential to safeguard your budget against the erosive effects of inflation. Take a comprehensive look at your budget with your Spokane financial advisor, evaluating your current financial situation. Identify areas where you can cut unnecessary expenses while increasing your savings. One common area for cost reduction is unused subscriptions. If you need more clarification about your subscriptions, consider using a subscription service manager like Rocket Money to analyze your bank account and uncover your subscriptions. They also offer a free version for budget-conscious individuals, and for a fee, they can negotiate with service providers to lower your bills on your behalf.

Invest Wisely

Contribute as much as possible to your retirement accounts while ensuring your money is placed in the most tax-efficient accounts. Make the most of your workplace's retirement plan, HSA, or establish an IRA or Roth IRA. If you're self-employed, collaborate with your Spokane financial advisor to set up a retirement plan tailored to your needs. These accounts not only allow you to save for the future but also reduce your taxable income, either now or in the future.

In taxable accounts, sell investments that lost value since your initial purchase and reinvest in similar alternatives. This tactic leverages tax loss harvesting, enabling you to lock in capital losses that can lower your taxable income for the year.

Ensure your investment choices align with your long-term financial goals and risk tolerance.

If you possess a Flexible Spending Account (FSA) for healthcare or dependent care expenses, it's vital to utilize any remaining funds before they expire at year-end. Different plans may offer grace periods, so it's prudent to check with your Human Resources department for specific details.

Happy smiling couple in their financial health

Tax Planning:

Make charitable donations to qualified organizations, which can be tax-deductible if you itemize your deductions. Additionally, consider donating appreciated assets for potential tax benefits.

Familiarize yourself with available tax credits, including the Child Tax Credit, Earned Income Tax Credit, and education-related credits, to determine your eligibility.

If you're aged 73 or older and possess retirement accounts like traditional IRAs or 401(k)s, make sure to take your Required Minimum Distributions (RMDs) by December 31 to avoid penalties.

For those aged 70.5 or older, you can leverage a Qualified Charitable Distribution (QCD) from an IRA or 401(k) to contribute to a 501(c)(3) organization, such as a nonprofit or church, without incurring taxes.

Consider contributing to a 529 plan for educational expenses, qualifying for state income tax deductions or credits, depending on your state's regulations.

Estate Planning:

Review and update your will, trusts, and estate plan as necessary. Confirm that your beneficiaries are current and that your assets will be distributed following your wishes. Additionally, if your estate exceeds federal or state estate tax thresholds, explore the annual gift exclusion, allowing you to gift a certain amount to family or friends without incurring gift taxes, effectively reducing your estate's tax burden.

General Financial Moves:

Investigate significant upcoming expenses, such as property taxes, insurance premiums, or major purchases, and allocate funds accordingly.

For complex financial situations or personalized advice, consider consulting with a financial advisor or tax professional to ensure that your financial decisions align with your specific goals and circumstances.

Remember, individual financial circumstances vary, so it's imperative to make choices that resonate with your unique situation. If you're still determining any financial moves, feel free to seek guidance from a qualified professional, such as your Spokane financial advisor, who can provide tailored advice.