The fall season represents a fantastic time to check in on and evaluate your personal finances and overall financial plan. There are a number of financial moves you can make in the final months of the year to ensure you are set up for success come January and throughout the new year. Here are nine pieces of advice to help you with your fall financial check-up.
Nine Fall Financial Planning Tips
- Review your monthly budget and get back on track if needed. Research has shown that we tend to spend more money during the summer, which seemed especially true this year with people returning to normal vacation schedules and the economy and businesses fully reopening amid the pandemic. Make a detailed list of your income and expenditures to identify areas where you can cut back. If you found yourself swiping your credit card more than usual this summer, prioritize paying off any balances that may have piled up on your statements.
- Check your credit report. With the excitement of the summer months and vacations, it can be easy to forget to monitor your financial accounts when you’re relaxing. It’s always a good idea to review your credit report after the peak summer travel season, as you want to make sure all of the accounts listed belong to you and are reported correctly. Scammers know when to take advantage of consumers, and the summer months tend to be a peak time for fraudulent activity. If you suspect any fraud or identity theft, consider freezing your credit account immediately and taking action to get it rectified.
- Review your asset allocation. We’re about to enter the final quarter of the year, which represents a great time to review your risk profile and ensure your portfolio allocation reflects your investment needs and goals, desired risk exposure, and time horizon for when you plan to begin tapping into your accounts. Although rebalancing is appropriate at any time throughout the year, it should especially receive attention at the end of the year when most of your position values are likely quite different than they were at the beginning of the year.
- Consider investing with impact. Environment, social, and governance (ESG) investing, socially responsible investing (SRI), and impact investing have grown in popularity in recent years, as investors are becoming more conscious of the companies they are investing in. As you review your asset allocation, you may also want to evaluate your portfolio to ensure your investments align with your personal values. Investing in companies that lead the way in climate change and clean energy, for example, can help investors generate positive returns while also driving positive change in and supporting the issues they care about.
- Plan your charitable giving. The holiday season is a popular time to give back, and making charitable donations is a great way to lower your tax burden and have a positive impact on the organizations and movements you are most passionate about. When planning your donations, you need to decide whether you want to give cash or appreciated securities. Additionally, you may want to consider a donor-advised fund (DAF), a tax-efficient way to manage your gifting that provides flexibility to help you maximize your impact.
- Review your estate plan and update as necessary. It’s important to assess your estate plan whenever there is a major change in your life, and the final months of the year serve as a good time to reflect on any changes throughout the year that may require updates to your plan.
- Consider the annual gift tax exclusion. If you are planning to give financial gifts to family members and loved ones, keep in mind that the annual gift tax exclusion limit for 2024 is $18,000, which represents the maximum amount a person can gift to another person this year without incurring any federal gift tax. Married couples can combine this limit and gift up to $36,000 to an unlimited number of individuals, free of federal tax. Make sure you gift your desired amounts, up to the limits, before year-end to ensure the amounts count towards 2024. Gifting ideas you may consider include setting up trusts and contributing to the trusts to reduce your overall estate tax liability or funding a 529 account for future education expenses of friends or loved ones. Remember, the recipient can be anyone and does not have to be exclusive to family.
- Plan ahead for your tax return. Regardless of whether or not you live in a state with high taxes, evaluating how minimizing the impact of taxation on your portfolio can help you build and sustain your wealth is a fruitful practice. A tax-conscious asset allocation strategy that accounts for the differences in the way various accounts are taxed can help you optimize after-tax returns. For example, a strategy called tax-loss harvesting can help minimize capital gains taxes in taxable accounts. Additionally, prioritize maxing out your employer-sponsored retirement plan to fully take advantage of the tax breaks offered through those accounts. For 2024, you can contribute up to $23,000 through your 401(k) plan, with up to an additional $7,500 in catch-up contributions if you are age 50 or older for a total annual contribution of $30,500. Also keep in mind that you can save up to $7,000 in an individual retirement account (IRA), plus up to an additional $1,000 in catch-up contributions for those age 50 or older.
- Set a holiday budget. Thinking through what you plan to spend this holiday season will help you avoid racking up any unnecessary credit card balances come December. Make a list of gifts you plan to buy, set a target limit for each gift, and take advantage of any deals around Black Friday. If you are planning to travel around the holidays, start that planning as soon as possible and book your flights, hotels, etc. before prices start to go up. Holiday costs can add up quickly, leaving you feeling a little knocked financially heading into the new year, but proper planning and budgeting can help you keep things in a comfortable spending range.
Final Points
The fall season and final quarter of the year serve as helpful reminders to evaluate your financial life and make the right moves to close out the year and set yourself up for success in the new year. Reflect on what steps you’ve taken in your financial life this year, and take action on any outstanding items. Remember to get started on your checklist now to avoid scrambling to meet the year-end deadlines of time-sensitive gifting and contributions.
Originally published on September 30, 2021.
Questions and/or interested in how this applies to your financial life?
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