With all of the distractions and demands this time of year, it can be especially difficult to stay focused on your family’s finances. Most of us would rather think about travel plans, holiday shopping, gift wrapping, family dinners and plans to ring in the new year. December, however, is actually a great time to re-evaluate your financial goals, wrap up any potential tax issues and prepare for the coming year.
The time invested now may provide some valuable end-of-year savings to protect your family’s assets from potential future problems. Following are a few suggestions to consider during the process:
- Review your family’s financial goals for this year as well as your long-term goals. Take time to assess your progress and determine where you want to be a year from now. Maybe your annual goal is to pay down your credit card debt or increase your monthly savings. Then, re-examine your short-term goals to see how they align with your long-term targets (such as retirement planning).
- If you participate in a flexible savings plan at work, be sure you have spent down all of your available funds. If not, take time to schedule that much-needed dental appointment, get that new pair of glasses or make another allowable purchase to absorb all of your annual contributions. Leaving money in your flexible savings plan is like leaving your money lying on someone else’s table. The same principle is true if you have met your annual deductable for medical, dental or vision insurance. By scheduling those appointments before December 31, they will cost you less now than at the beginning of 2011 when your deductible resets.
- Consider adjusting the amount of withholding on your W-4 at work. If you got a big tax refund and you expect to have similar income and expenses in the coming year, then you may want to reduce your withholding to increase your monthly income. On the other hand, you may want to increase your withholding if you had to pay additional taxes this year and you expect to have similar income and expenses in the coming year.
- Get a free copy of your credit reports if you haven’t checked it for at least one year. You are allowed to receive a copy of your credit report from each of the three major credit bureaus every 12 months. Free copies are available at annual creditreport. Com, but beware of other “sound alike” websites. If you find any suspicious activities on your reports, be sure to ask the credit report company for more information and dispute any items incorrectly listed on your records.
- Visit with your insurance agent or financial planner about any changes in your lifestyle, family situation or financial goals. Adjusting your coverage or savings will minimize your risk and provide greater financial stability for you and your family.
- Update your inventory of household assets by adding any gifts or purchases that you or other members of your household received since creating the list. Another option is to update or create a picture inventory or video recording of all of your household and personal items in case of fire, theft or natural disasters. Be sure to store at least one copy of your inventory in a fire-safe file, a safety deposit box at your financial institution or some other location away from your primary residence. Of course, if you don’t have an inventory, now is the time to make one.
- Start a new tax folder to store all of your receipts and other paperwork for easy access during the coming year. Finding a safe place to store your receipts, paid bills, insurance policies, credit card information, bank records and other financial papers is important, regardless of your family’s income or size. Also, be sure someone else knows where the papers are located and understands your family’s recordkeeping system.
- Monitor your family’s spending and keep your holiday spending under control. Overspending on special occasions is one of the biggest money pits for most families and can offset any other attempts to promote financial stability. Having a financial plan for the holidays will help keep spending in check and reduce potential increases in debt.
Here’s hoping you and your family have the happiest of holidays and a prosperous new year.
Sue Lynn Sasser, PhD, is an associate professor of economics at the University of Central Oklahoma.