It’s that time of year again. And I don’t mean the time for turkey, family and gift-giving. I’m talking about reviewing our yearly finances. Some of us shudder at the thought, but it doesn’t have to ruin your holiday season, and going into the new year with your financial house in order may be the best gift you could give yourself.
Here is my list of the top-ten best-practices for protecting your finances. Follow these simple rules and not only will your money be protected, but you’ll be well prepared come time to file those 2017 taxes.
Step 1. Get Organized
This may sound like a no-brainer, but having all of your important financial documents in order is the first step before you go any further on this list. The rest of these tips require that you have this information at your fingertips. Plus, getting organized now will you save the frustration of searching and digging when you need key documents at tax time.
Consider using an online tool to help keep you organized. One great site for tracking both your assets and liabilities is GetWela.com. With this easy-to-use tool, you can stay on top of what’s coming and going.
Here are some of the key financial documents you should gather:
– Relevant receipts
– Cancelled checks
– Income information
– Contribution acknowledgment letters
– Investment income forms
– Settlement statements from the sale or purchase of your home
– Any other financial documents from 2017 that you’ll need for taxes or to keep as a record
Step 2. Freeze Your Credit Reports
In these days of online scammers and hackers, we have to be vigilant about protecting our credit. The best way to achieve this goal is to put a “freeze” on your credit reports with all three major credit reporting agencies (Experian, Transunion, and Equifax). A freeze seals your credit report, meaning no new lines of credit may be opened until you “thaw” your accounts.
You can see why this is so important. Say a hacker gets your personal info and tries to set up a bogus account in your name. With a credit freeze, they won’t be successful. It’s a way to insulate yourself from credit fraud.
Need a new line of credit? Just use the PIN that you are provided by each credit agency to thaw your accounts, and you’re in business. It’s that easy.
Step 3. Set Up Dual Authentication
Speaking of identity theft, another added layer of protection is to enable dual authentication. Make sure that all of your online financial accounts have this extra step added on to the login process.
Setting up dual authentication is easy to do. Every site is different, so you’ll have to check out your particular banking institutions procedures, but almost all financial sites have some form of dual authentication these days. It may just save you from being the victim of cybercrime.
Step 4. Give to the Gift of Cash
The season of gifting is just around the corner. If you want to give greenbacks to people on your holiday gift list, make sure you keep track of how much you stuff in their stocking. Before December 31st, you can give up to $14,000 (or $28,000 if you’re married) to as many people as you would like without having to file a gift-tax return.
Step 5. Give to Charitable Organizations
This is a win-win endeavor – contributing to a charitable cause is a great way to feel good, and it’s a great strategy for tax-reduction.
If you decide to donate, be sure to keep your receipts for all the contributions you made in 2017. Remember, you can also donate stocks or mutual funds that you’ve held for more than a year. This is a great choice if you have stocks or mutual funds that no longer fit your investment goals. If the charity to which you’d like to gift the appreciated stocks or mutual funds cannot accept them in their original form, another option is to set up a donor-advised fund.
Check Out: Paying It Forward In Retirement
Step 6. Itemize Your Deductions
By itemizing your deductions, you get an idea about whether you need to spend more or less by the end of the year. You can accelerate or delay certain payments so that a larger amount falls within 2017 or 2018.
Consider adjusting the timing of your payments with medical expenses, property taxes and charitable contributions. Remember, though, that medical expenses for 2017 are only deductible to the extent that they exceed 10% of your adjusted gross income. For charitable contributions, just be sure your credit card is charged or you mail your checks by December 31st to make the donation deductible for 2017. Make the most of this year’s deductions, as we don’t know what deductions for 2018 will look like yet.
Step 7. Defer Your Income or Bonuses If Necessary
If you are in the top of your tax bracket, you may want to consider deferring any additional income or bonuses to January. Asking your employer to hold the bonus may prevent the need for you to pay more in taxes.
Another option is to wait to sell assets that will produce a large capital gain until at least January. Before deciding to defer, consult with a tax professional to review your individual tax situation and future anticipated earnings.
Step 9. Contribute the Maximum Amount Possible to Your 401(k)
No matter if you have a 401(k), 403(b), 457(b) or another employer-sponsored plan, you should invest at least the maximum amount, $17,500, into this account by December 31st. By contributing the max, your taxable income for the current year will be reduced, and your tax-deferred savings will grow. (You know I love compounding.)
Check Out: 4 Ways To Build Wealth
Step 10. For Those 70 or Older, Take Your Required Minimum Distribution
By law, you cannot keep retirement funds in your account indefinitely. A Required Minimum Distribution (RMD) is the amount of money that you must withdraw from your retirement accounts each year after age 70. If you don’t, you’ll face a penalty. The required amount is different for everyone, so be sure to research all the details regarding your RMDs to find ways to make tax-free distributions.