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5 Important Financial Actions to Take Before the End of the Year Thumbnail

5 Important Financial Actions to Take Before the End of the Year

By Scott Tschappat

With the flurry of holiday activity packed into the last couple months of the year, it can be a time when our finances take a backseat. But you don’t want to start the new year off wishing you had done things differently. 

There are many ways to take control of your finances and set yourself up for a successful future before the year is over. Take some proactive steps to bolster your finances with these five tips.

1. Evaluate Your Emergency Fund

    Now is the time to ensure that you have enough money set aside in your emergency fund or create a plan to build this up over the next year. An adequate emergency fund should cover 3-6 months of necessary living expenses, including mortgage or rent, utilities, groceries, transportation, etc. 

    With all stock market uncertainty and recession fears, many experts have suggested maintaining a larger emergency fund closer to 6-12 months of expenses. If you’re single, or your household only has one source of income, consider saving on the higher end of this scale to make sure you’re covered in the event of a job loss or reduction in income.

    However much you save, be sure this money is held in a highly liquid account. It needs to be readily available and easily accessible, but it should also be in an account that offers a competitive interest rate so that you don’t lose out on potential growth.

    2. Asset Allocation & Investments

    The end of the year is also a great time to review your asset allocation strategy and incorporate ESG and impact investing if desired. Given the dramatic market volatility and historic levels of inflation over the last year, it’s crucial that you evaluate your investments and make sure your portfolio is properly diversified. It should also be tailored to your specific risk tolerance level, ensuring that you are earning enough returns to keep up with inflation, but you are not overexposing yourself to risk. 

    If you are interested in using your funds to support environmental, social, or governmental issues (ESG), you can also consider impact investing as a way to earn returns while also promoting change on causes you care about.

    3. Charitable Donations

    Charitable donations are another option that can be reviewed as the year-end approaches. The holidays are a great time to give money and assets to your favorite non-profits, churches, and organizations. 

    Charitable donations can be used as part of your overall tax strategy, or as part of a comprehensive estate plan. Both options provide many potential benefits including supporting causes you care about, reducing your taxable income, and reducing your taxable estate.

    4. Maximize Employee Benefits

    While every employee benefit plan has its own rules and regulations, many of them expire or reset at the end of the year. You worked hard for these perks, so be sure to use them before it’s too late!

    Medical and Dental Benefits

    Now’s the time to take care of all your healthcare needs before your deductible resets. Dental plans in particular often have a maximum coverage amount. If you haven’t used the full amount and anticipate any treatments, make it a priority to set an appointment before December 31st.

    Flexible Spending Account

    Like your health insurance benefits, you’ll want to use up as much of your FSA (flexible spending account) dollars as possible by the end of the year since you are only allowed to carry over $570 for the plan year ending 2022. Also, keep in mind that the COVID-19 relief measures that allowed taxpayers to carry over their entire FSA balance are no longer in effect for 2022

    That being said, check the restrictions on your account to see what the money can and cannot be used for, and take care of any needs you may have as allowed by your plan.

    Sick and Vacation Time

    Depending on your company, your sick or vacation time might expire at the end of the year. Check with your HR department to learn about any expiration dates. If it does expire, fit in a last-minute staycation or take some time off to work on projects you’ve been putting off. If you need to make any trips to the doctor, schedule those appointments now to make use of paid-time-off benefits before you lose them.

    5. Review Your Plans and Policies

    Lastly, take another look at your estate plan and insurance coverage. If you took the time and energy to create an estate plan, check it periodically to ensure all the documents are up to date and no major details have changed. 

    Your insurance needs may also change as the year goes by, so periodically review your coverages and designated beneficiaries to bring them up to date to reflect your current financial situation. For example, if you paid off debt, you may not need as much life insurance coverage since your family’s liabilities have decreased. You might also want to evaluate your need for other types of insurance, such as long-term care or disability insurance. 

    Partner With a Professional

    At Acute WealthCare, we can help you finish out 2022 on a positive note, and together we can work toward achieving your financial goals for 2023. Reach out to us today! Schedule a 15-minute introductory phone call to get started.

    About Scott

    Scott Tschappat is a wealth advisor at Acute WealthCare, an independent, fee-based comprehensive financial services firm with over 20 years of experience. Scott is committed to helping his healthcare worker clients create a financial plan that brings them comfort and dignity. Scott learned the importance of proper financial management and making a plan for the unexpected at a young age when his father passed away suddenly and he watched his mother use the life insurance money wisely to take care of their needs, both present and future. He strives to steward his clients’ money well, as if it were his own mother’s, and help them every step on the journey to their financial future. 

    Scott lives in Highlands Ranch, CO, with his wife, Bridget, a school counselor at All Souls Catholic School, and their two daughters, Sarah and Emily. He loves sports and has been lucky enough to coach both of his daughters’ basketball teams. In the spring and summer, you can find Scott getting his hands dirty gardening and enjoying live music at Red Rocks or another local venue. To learn more about Scott, connect with him on LinkedIn. You can also register for his latest webinar on What We Do & How We Help.