And so it goes. We will be celebrating the end of this year and the beginning of a New Year over the next couple of weeks. This is a good time to take stock of where we are financially. What should you be considering?
Taxes. Americans are addicted to tax refunds. Consider taking control of your impulse to lend Uncle Sam money for use across the entire year, especially because Uncle Sam does not pay you interest. If your refund is substantial, take a minute to reduce your withholdings by filing a revised W-4 with your employer. Don’t know how to figure? The IRS can help with an estimation on their website.
If you have a flexible spending plan for child care and/or medical expenses and have over $500 in these plans that is not carried over by your employer, spend the balance on qualified expenses.
Net worth. Calculate your net worth to see if the difference between your assets and debts is greater than it was last year. If you didn’t do this last year, you will not know. Yet doing this year after year is a great way to keep score in your financial life, as your net worth should grow by at least the rate of inflation each year.
Review your savings. Are you saving enough money for your goals; retirement, education, second home, vacation or other goals? The year 2015 has been relatively flat with the S&P500, so the market might not have helped you with your plans. If it feels that you need to add savings to reach your goals, this is a good time for that planning.
Debts. Your net worth includes a list of your debts so it is time to compare that debt load from last year to this to reduce your total debt load. Do you need to create a better plan to reduce your total debt? Consider working to pay off the debt with the greatest interest rate (APR). Work to reduce your debt load by both paying off existing debts while taking on no new debt. Your debts outside of your mortgage (but do include your car loan) should not be more than 20% of your monthly take home pay. Work to get your debt load in check.
It is interesting that the end of the year coincides with the shopping experience of the holidays. While trying to make the holidays brighter for others, allow a few moments to consider your financial position so the season can be bright for you and your family as well.
Money isn’t everything, but it is something. Be a good shepherd of your money and express gratitude for the gifts you have been given. The writer William Arthur Ward gave us this, “Feeling gratitude and not expressing it is like wrapping a present and not giving it.” Give your gift of gratitude to others as a gift to them…as well as a gift to yourself!