By: Ashley Ann Reich
Many of us anticipate the wonder of the holidays in our homes as we trim the tree and gather with those that mean the most. There are many things about the upcoming holidays that are exciting and bring us to a place where we are reminiscing about all the memories of this year. As we consider the last few weeks of the year, focusing on a few financial strategies will help us end the year on a positive note and set us up well for the future.
Max Out Your Benefits
Whether you have a Health Savings Account (HSA) or, 401(k)/403(b) retirement account, or both, take a look at your pay stubs and account balances to see if you are close to the IRS maximum for 2024. According to the IRS, you can contribute up to $23,000 in your retirement account that includes a 401(k), 403(b), or 457 plan, and if you are over the age of 50, you are allowed catch-up contributions that go above and beyond the annual maximum. For those with a Health Savings Account, or HSA, this is one of my favorite wealth-building tools and is triple-tax-free – money going in is tax-deductible, growth is tax-deferred, and spending on qualified expenses is tax-free. You can contribute up to $8,300 for a family or $4,150 for a single individual in 2024, and luckily, the account maximums increase annually. If you also have an IRA, you can contribute up to $7,000 in a Roth IRA account or up to $8,000 if you are over 50. Maximizing these benefits each year is a great goal if you are out of debt and ready to build wealth and leave a legacy.
Year-End Budget Review
Each December, my husband and I take a look at how well we moved the needle toward our financial goals, which largely depends on how well we stuck to our budget. Sitting down and doing a deep dive into the past 12 months to determine what went well and how you tracked towards your savings and investing goals can help us see where we need to place guardrails in the next year. Here are a few tips as you review this current year and look to the next one:
- Look at your spending – did you have lifestyle creep due to an unexpected raise or bonus? Where are your largest categories that might need to be trimmed for the next year? For many Americans, the grocery and eating out budget has increased significantly. Additionally, consider how you are spending – is it impulsive or intentional? Either way, if overspending is a habit, you will want to curb this for the new year to make positive financial traction.
- Calculate your net worth – run all your retirement account balances, check your savings accounts, and debts to calculate your net worth. According to Ramsey Solutions, your net worth is simply what you own minus what you owe or your liabilities in debt. If you are looking to achieve a specific net worth, it is best to understand how you are tracking toward that goal and if there are additional debts to pay off in the new year to get closer to a positive net worth. You can also run a simple net worth calculation that includes your assets and liabilities and visualize how each plays a role in the calculation. This is an annual exercise that we do and should always be part of your year-end review.
- Give to a charity – for high-earners, ensuring that you have enough charitable contributions throughout the year is a significant tax strategy. Make sure that the organization you are donating to is tax-exempt, and keep track of your donations in case the organization fails to send you a gift form before tax season. There are many ways to use charitable donations as a tax write-off, depending on your situation, which can keep you from paying excess taxes.
Goal Planning
Before the beginning of each year, you should review your goals for the current year and make new ones. If you use a planner, try putting your annual goals there as a visual reminder of what you are working towards, and it makes for easier tracking. Perhaps you want to lose weight this year or become more diligent in budgeting or paying down debt. Consider what steps you need to take to achieve those goals and what about your lifestyle will need to change. For some, this might mean cutting back on Door Dash’ing Starbucks each morning or significantly reducing an ‘eating out’ budget. For others, it might mean starting a gym membership to help with community and accountability. For anyone with financial goals, I highly recommend starting with the foundation of budgeting. Consider if you need to be more consistent each month and stick to your budget – whatever your financial goals are this year, it likely starts with consistent budgeting and determination.
Suppose you have more aggressive financial goals that have an investment focus. In that case, I recommend starting with maxing out your retirement accounts and increasing your savings account to a number that you would be comfortable with for a rainy day – Rachel Cruze suggests at least 3-6 months of an emergency fund. I have always been told, “If you fail to plan, you plan to fail,” and there is no truer statement when it comes to your financial goals. Set goals, document the strategy, and stick to it for this upcoming year – you will not regret the positive momentum this will have on your future.
ABOUT THE AUTHOR
Ashley Ann Reich has been with Liberty University since 2007, first working in Student Financial Services and then as Executive Director of Government Affairs before transitioning to her current role as Senior Vice President of University Compliance. During her time at LU, Ashley started the first financial literacy program, reaching thousands of students in budgeting, paying down debt, and planning for the future.
