With the holidays upon us, it’s always an interesting time of year for personal finance. For most of us getting gifts for all of our loved ones is usually what consumes our minds during this time of year. However, it’s also the time you should start thinking about the new year and setting yourself up financially.
At the top of the list is ensuring that you have health insurance. If you’ll recall, the Affordable Care Act made it a requirement for all Americans to have insurance or pay a penalty that will be assessed with your taxes. Next year that penalty rises to $695 or 2.5% of your income (whichever is greater) — not to mention the costs that you could face should you need intensive medical care. Open enrollment for the federal and state exchange sites ends January 31st, so make sure you have a plan by then.
Speaking of taxes, do you ever wish that instead of getting a lump tax return in April you could just get more money in your paycheck throughout the year? If so consider changing your tax withholding by filling out a Form W-4. Take a look at your year-end paycheck stub and use this convenient IRS withholding calculator to update your filing to reflect what you actually make per year.
Whether you consider it a “year-end bonus” or a “holiday bonus,” December usually means an extra paycheck for many of us. While it might be tempting to add those funds to your holiday budget or skip down to the Bahamas during the cold winter months, there’s likely a better use for your bonus. If you have any credit card debts you should definitely think about helping pay it down with the help of your bonus. Alternatively starting or growing an emergency fund is also a great idea.
If you need yet another good home for that bonus burning a hole in your pocket try your IRA or other retirement accounts. Different types of accounts have different yearly limits, allowing you to maximize your contributions. Remember: the more you put in now the more you’ll have when it comes time to retire.
The holidays are always a great reminder that there are others in the world who are less fortunate. With that in mind the end of the year is also the perfect time to donate to your favorite charities or find a new one that could use your gift. Not only will you feel good by doing good but you can also deduct your donation from your 2015 taxes (just be sure to hold onto some sort of documentation of your contribution).
Lastly don’t wait until the new year to make resolutions regarding your finances. Use this as an opportunity to reassess your budget, set goals for paying off your debt or saving for big ticket items, and organize your files so you’re ready for tax time. If you’ve been slacking on creating a budget or keeping organized with your financial documents, it’s also not too late to add bookkeeping software to your holiday wish list.
Believe it or not 2016 is just around the corner. Don’t let the stress of the holidays distract you from setting yourself up for a great new financial year. Take some time to consider these important end-of-the-year items and have a happy 2016.