By Jeremy Wallace and Andrew Hart
If you just want to get through the rest of December so 2020 can be over, we understand. In the midst of canceled plans, work stoppages or adjustments, complicated family decisions, and (as if that weren’t enough) financial challenges, you may feel like you don’t have much control over life. But there’s one area where your actions can make a big difference down the road: your finances. So even though there is plenty unknown ahead, follow through on these 5 financial actions before the ball drops on December 31st to give yourself a leg up.
1. Make Your Budget Work For You
Even if your income hasn’t been affected by COVID-19, it’s likely that your spending has. Whenever you experience life changes, it’s wise to take another look at your budget to make sure your spending is in line with your goals and shift things around to manage your priorities. For example, this year might have shown you the importance of having financial margin and now you want to double down to get rid of debt. It’s also possible that many of your daily expenses have experienced some ups and downs. You might be spending less on gas and eating out, but more on groceries, masks, and online shopping, not to mention that prices on many basic items have increased. If you have experienced income changes, make sure you factor those in and adjust your spending accordingly. Go into 2021 with a rock-solid budget that helps you feel financially secure.
2. Keep Dreaming
Don’t be afraid to set new goals for 2021. Look at your new budget and priorities and find ways to work toward your savings goals. Get creative with things you want to accomplish next year. You may not be able to take that international trip you’ve been dreaming about, but you can get your family together for a local vacation or refocus your energy on tackling a home renovation. If you’re planning to retire, relocate, sell your business, or make any other big financial moves, identify now what changes you can make to smooth the transition.
3. Don’t Skimp On Your Savings
If there’s one thing this year has taught us, it’s the importance of having an emergency fund. If you haven’t already, now is the time to ensure that you have enough money set aside to cover 3-6 months of necessary living expenses or unexpected extras. While these savings should be easily accessible, you also want your money to be working for you. Research different savings vehicles that will keep your money liquid but also pay a competitive interest rate.
And while things seem uncertain, don’t shrink back from saving for the future or try to wait things out. Consistency and compound interest make all the difference in the growth of your investments. If possible, max out your contributions to your 401(k) by the end of the year to make the most of your retirement savings. For 2020, you can contribute as much as $19,500 (or $26,000 if you are age 50 or older). You might also consider contributing to a Roth IRA. In 2020, you can put up to $6,000 in any type of IRA. If you are over age 50, that amount goes up to $7,000 thanks to the $1,000 catch-up contribution. Finish the year strong by investing in your future!
4. Take Advantage Of Your Employee Benefits
While every employer has different rules that apply to the benefits they offer their employees, many benefits expire or reset at the end of the year. You work hard for these perks, so be sure to use them!
Medical And Dental Benefits
At the beginning of 2020, did you have good intentions of taking care of some dental work, blood tests, or other medical procedures lingering on your to-do list? Now’s the time to take advantage of all your healthcare needs before your deductible resets. Dental plans in particular often have a maximum coverage amount. If you haven’t used the full amount and anticipate any treatments, make it a priority to set an appointment before December 31st.
Flexible Spending Account
Like your health insurance benefits, you’ll want to use up as much of your FSA (flexible spending account) dollars as possible by the end of the year. Rules only allow you to carry over $500 to the next plan year. Check the restrictions to see what you can use the money for, and take care of any needs your plan allows.
Sick And Vacation Time
Depending on your company, your sick or vacation time might expire at the end of the year. Check with your HR department to learn about any expiration dates. If it does expire, fit in a last-minute staycation or take some time off to work on projects you’ve been putting off. If you need to make any trips to the doctor, schedule those appointments now to make use of paid-time-off benefits before you lose them.
5. Find An Advocate
If this year has taught us anything, it’s that we all need each other’s support. Before the year is over, seek out a financial professional who can take an objective look at your financial situation and help you take your finances to the next level regardless of what comes your way in the coming months and year. In a time of heightened emotions, dramatic headlines, and a temptation to panic, you need to know you have someone in your court watching out for your money and making sure you are on track to your ideal future.
Jeremy Wallace is founder and chief investment officer at Wallace Hart Capital Management, an independent financial services firm committed to offering comprehensive advice and customized services. Jeremy has 20 years of experience in the financial industry and is passionate about helping clients preserve and enhance their wealth so they can pursue their passions. Jeremy graduated from Emory University with a degree in international economics and a certificate in financial planning. Outside of the office, Jeremy spends most of his free time with his wife, Julie, and their three children, Isabel, Lincoln, and Reid. He is an avid Chicago Cubs baseball fan, and he enjoys golfing with his wife and traveling with his family. Learn more about Jeremy by connecting with him on LinkedIn.
Andrew Hart is the co-founder and chief planning strategist at Wallace Hart Capital Management, an independent financial services firm committed to offering comprehensive advice and customized services. Andrew has 15 years of experience in the financial industry and strives to provide new and better strategies and processes to improve his clients’ lives. Andrew graduated from Wittenberg University with a bachelor’s degree in business management and holds a certificate in financial planning from Georgetown University and the CERTIFIED FINANCIAL PLANNER™ designation. When he’s not working, you can find him enjoying the city of Lexington, KY and spending time with his wife, Susan, twin sons, George and Ted, and daughters Merritt and Philippa. To learn more about Andrew, connect with him on LinkedIn.