As we approach the end of the year, there are a number of actions you might want to take to establish firmer financial footing for 2014. Looking in the mirror at your own finances will give you a better understanding of how you’re managing your money as well as your progress towards achieving long-term goals such as retirement.
Here are four money moves to make in December:
1. Evaluate your spending habits, so you can trim expenses next year. Take the time now to see if there are any day-to-day outlays you can reduce in 2014. For instance, maybe you can cut down on trips to the coffee shop, which might cost you thousands of dollars over the course of a year.
(MORE: 9 Year-End Moves to Cut Your 2013 Taxes)
Look at your 2013 spending patterns and put together a basic budget for 2014 based on them. If you see that some of your spending was out of whack, you can then go into the new year planning to deal with these red flags.
Free online calculators, such as my firm’s ING Home Budget Analysis Calculator, can provide a good starting point to assess your budget and find opportunities to spend less, so you can save more.
2. Increase your retirement account contributions at work. The open enrollment period for most U.S. companies’ retirement plans ends this month. So this is an excellent time to sign up to boost the amount you’ll automatically have taken out of your paychecks in 2014. If possible, try to get close to the maximum annual contribution amounts allowed: $17,500, if you’re under 50; $23,000, if you’re 50 or older.
Speaking of retirement savings, the annual IRA contribution limit for IRAs is $5,500; $6,500 for individuals over 50. You can make IRA contributions for 2013 until April 15, 2014.
3. Review your insurance policies. This way, you’ll see if you’re overpaying for any of them — because you have more coverage than you need — or if your coverage is deficient.
Before the ball drops, look over your homeowner’s, auto and life insurance policies to see if your coverage is appropriate. Also, do some online research to see if there are less expensive options out there.
Many people nearing or in retirement are supporting family members financially. A 2013 ING U.S. study found that 37 percent of pre-retirees over 50 and 27 percent of retirees have children or grandchildren who look to them for financial assistance; 13 percent of both groups help their own parents. If you’re among those lending assistance, carve out some time in December to ensure that you have enough life insurance to provide for your loved ones.
(MORE: 4 Precautions Before Lending Money to Your Family)
4. Prepare to make financial gifts to family members in 2013 and 2014. At this time of year, many parents and grandparents think about giving their children and grandchildren money for the future. You can bestow to each one up to $14,000 a year ($28,000 if you make the gift with your spouse) without owing a federal gift tax or filing the IRS Gift Tax Form 706.
If you’re looking to provide more than that amount, consider making two gifts: one in December and one in January. Your kids or grandkids will be grateful and you’ll be glad to avoid owing unnecessary taxes.
Securities and Investment advisory services offered through ING Financial Partners, Member SIPC.