Among the business of holiday frenzy and year end parties it may seem like an odd time to get your financial house in order. But in fact December is an excellent time to take stock of your personal finances. As you are taking stock there are a few items for you to double-check, and make sure that you haven’t forgotten so that you can maximize the power of your money from the previous year.
1. Donate to Charity.
Clean out your closets to make room for this years holiday gifts, and donate them to a great charity. Items from your closet, also known as “property” by the government, can be deducted up to $500 if donated before December 31st to an IRS recognized 501c(3) organization. If cash is more your speed you can donate that way as well, and deductible limits are individualized based upon your adjusted gross income. Just remember that for any donation be sure to collect those receipts from your donations otherwise the government may not recognize your generosity. Also be sure to itemize all of these deductions.
2. Use up your flexible spending account.
Make sure that money in your flexible spending account for this year does not go to waste. Get those extra contacts that you might need or make that eye appointment you’ve been putting off. Also, if you find that you did not have enough in your flexible spending account this year or that you had too much, take the time to adjust next year’s contributions to that account.
3. Review your insurance policies.
Have you gotten married, had a baby, are getting ready to have a baby, etc.? If so you may want to research for new insurance plans that might suit your family’s needs more satisfactorily. Even if you haven’t had any major changes, it is still a good idea to review your insurance policies to make sure that you are getting the most bang for your buck.
4. Considering selling your losing investments.
Do you have some investments that are losing you money? Consider selling them and deducting the loss to offset any capital gains that you may have had this year.
5. Build a file to start collecting the items necessary for this year’s taxes.
Things like charitable giving receipts, your W-2s from your employers, 1099-MISC forms for self-employment income, 1099-IN (interest) and 1099-DIV (dividends) forms, 1099-B forms showing brokerage trades in stocks and bonds, K-1 forms for income from a partnership, small business, or trust, and written documentation such as a spreadsheet or a bank statement for other incomes such as rental, alimony, etc. are good to include in your file.
6. Finish your energy efficiency home improvement projects.
Did you know that you can claim up to $500 in home improvements that improve the energy efficiency of your home such as new windows? You can, but there are a few things to keep in mind. First of all the project needs to be finished by the end of the year. Secondly 2011 is the last year for this deduction. And thirdly this is a lifetime credit which means you can only claim it once, so if you claimed it in 2010 you can’t claim it again.
7. Pay an extra mortgage payment.
If you pay next year’s first month’s mortgage payment early and during this year you can claim the mortgage interest for that extra payment.
Finally probably the best thing to do this year for your finances during this last month is to take stock of the previous year. How would you improve your financial situation? What have you done to improve your financial situation that you are proud of? What are your personal financial goals for the next year? All of these are questions to ask ourselves as we are finishing up this year and moving into and planning for the next.