Take advantage of the waning days of 2021 to save money.
As we inch ever closer to 2022, now is the time to prepare for a more prosperous new year. Think of it as end-of-year financial housekeeping. These seven clever money moves shouldn't take long, but they can help get 2022 off to a strong start.
1. Take the investment loss
If you've recently taken a peek at your portfolio and were slightly horrified by losses, now may be the time to make lemonade out of lemons. Chances are if you have a balanced portfolio, you've also had some big winners this year. Why not use the losses to offset taxable gains?
If you're a single filer who earns less than $40,400 or a married couple earning less than $80,800, you won't owe taxes on capital gains anyway, so there's no need to write off losses. However, if you earn more and your capital gains will be taxed, you can cut the bill by up to $3,000 by claiming the loss. If losses exceed $3,000, the additional amount can carry over and be claimed on your 2022 tax return.
READ MORE: Make These 3 Brokerage Account Moves Before the End of the Year
2. Play catch up
It's a safe bet that you'll never kick yourself for saving "too much" for retirement. Storing more away now in your traditional IRA, 401(k), or 403(b), is one way to pad your retirement fund while also lowering your tax bill. That's because the money you put into those retirement accounts is not taxed until you retire and begin to withdraw money.
Do you have a health savings account (HSA)? If so, make sure you've contributed the maximum allowable before the end of the year. Contributions to eligible HSAs are tax deductible even if you don’t itemize.
Remember: You have until April 15, 2022 to make IRA contributions. Planning for that now may leave you with more to contribute.
3. Use remaining FSA funds
While we're on the topic of health savings plans, remember to use any funds remaining in a medical flexible spending account (FSA). Many FSA plans include a "use it or lose it" clause, meaning any money not used by the end of the year is lost to you.
If your FSA plan does not include a grace period that allows you to carry money into 2022, now is a good time to book an annual check-up, dental appointment, or eye exam. If you don't need any of those services, plenty of shops online carry FSA-eligible products. Take a look at one of those sites to see if there's anything you need.
READ MORE: Worried About Healthcare Bills? 3 Accounts Worth Saving In
4. Give your bank the once over
Gather a few bank statements from 2021. Are you being charged banking fees? For example, some banks charge fees for monthly account maintenance, low balances, transfers, ATM use, and other everyday services. If you're being nickeled and dimed by your bank, why waste the money? Now may be the time to shop for a different financial institution, whether that's another brick and mortar bank, credit union, or online bank. The goal is to make sure fees you're currently being charged end up in your savings account instead.
5. Reexamine the old budget
A realistic, effective monthly budget is worth its weight in gold. Not only can a reasonable budget keep you on track, but it can help you plan for the future. Take a look at the budget you've been using. Is it realistic, or do you find yourself spending more than you have budgeted each month?
It's natural to create an "ideal" budget, but if it's not realistic, it's nearly impossible to stick to. Sit down with your budget and rework the sticky parts. For example, if you have $100 budgeted for groceries but routinely spend $125, see if there's anywhere else in the budget that can be cut so more can be dedicated to groceries.
READ MORE: The Complete Guide to Budgeting Methods
6. Plan for ‘found’ money
If your company gives end-of-year bonuses or your parents routinely send a check for the holidays, make a plan for it. For example, you may decide to use the funds to open an IRA or pay off existing debt. Having a plan in place before receiving extra money is the best way to ensure you'll use it in a way that benefits your future.
7. Check your credit report
If you have not done so yet this year, now is a great time to order a free copy of your credit report. Federal law allows one free copy of your credit report annually from each of the "big three" credit reporting agencies -- Equifax, TransUnion, and Experian. You can get all three by filling out a single form at AnnualCreditReport.com. Go over each report with a fine-tooth comb, and don't be surprised if the three reports don't match. For example, one may show that you owe money on a credit card you paid off months ago, while another may show the bill paid in full.
Circle any mistakes you find, no matter how small, and dispute the errors with the credit reporting agency in question. Per the Fair Credit Reporting Act, the credit reporting agencies have between 30 and 45 days of receipt of your dispute to investigate. If they can't prove that information is accurate, they must remove it from your report.
End-of-year financial moves are all about making tweaks, large and small. Making the right tweaks now can help you move into 2022 with the confidence of knowing that you're headed in the right direction.
