When it comes to financial plans during the holiday season, getting off track may cause many individuals and families to spend the rest of the next year playing catch-up. Overextending your budget during the holidays can impact your ability to put money away for retirement, college savings, and all other facets that are integral to a successful financial plan. However, it’s important to remember that it’s never too late to get your finances in order, and the New Year is a great time to start anew.
Below, we outline a few strategies to consider in order to get ahead in 2015:
- Take advantage of that year-end bonus. While pay raises of five to 10 percent are long gone, view a year-end bonus as padding to your savings plan. While it’s easy to see this increase in pay as extra money to spend, it should be seen as extra money to set aside and put towards reaching your savings goals.
- Tax-loss selling. This strategy is a way to minimize the taxes that you pay, improving the after-tax return of any investment portfolio. If there is an investment that has gone down, sell it and take the loss in order to offset any capital gains that you may have taken in 2014.
- Set new goals. Before the year comes to an end, make sure that you’ve contributed as much as you could to your 401(k). Some HR departments are pretty forgiving when it comes to making a change to contribution plans before the end of the year, so take advantage of it if you can. After the New Year, try to increase the amount that you are saving by a certain percentage and keep it there.
- Consider a Roth conversion. If you are an older IRA owner, you can consider a Roth conversion with some of your IRA dollars. Some older IRA owners don’t have high taxable income, when you convert to a Roth; you have to pay tax on the amount of money that you’re converting from the traditional IRA to the Roth. Once money goes into a Roth, it will become tax-free for the rest of your life and your beneficiaries’ lives.
The key to sticking to financial “New Year’s Resolutions” is consistency. Many people get off track because they say that savings are too tight during a particular month or they had an expense that they didn’t plan for. However, when saving for your future financial goals – whether it’s for your child’s education or your own retirement savings, the discretionary income that you have after saving should leave you with an amount that can be spent.
Set up a savings plan and be consistent. The only way it should ever be altered is if you increase the money that you aside.