Guest Post | Contributor: Elizabeth Bybordi of Sparkable Finance
Believe it or not, 2016 is quickly (or finally) coming to a close. The end of the year is usually filled with lots of excitement around holiday parties, shopping, good food, and family. Throughout all of this it can be difficult to find time for yourself. However, the end of the year serves as a perfect time to take a comprehensive look at your financial well-being. Below is a list of tips to get your finances in shape before the New Year.
1. Put extra cash to work.
Beyond saving for an emergency, it serves little purpose to keep excess cash sitting in a checking or savings account. Instead, put that cash to work for you. Pay down any high-interest credit card debt, pay off outstanding bills, max out an IRA ($5,500), or open a brokerage account to invest for a specific goal. All of these options provide higher value than leaving cash sitting in an online bank account earning less than 1%.
Bonus Tip: Is your Emergency Fund still sitting in a brick + mortar bank savings account?? Move the cash to an online bank (like CapitalOne360 or Ally) to earn a higher interest rate a.k.a. make your money work harder for you.
2. Open a Roth IRA.
If you haven’t done so yet, consider opening a Roth IRA if you still qualify. Contributions are made after tax today, but your later withdrawals are completely tax-free. If you earn more than the income limits for a Roth IRA, open a Traditional IRA. You may or may not be eligible for a tax break depending on whether you (or your spouse) is covered by an employer plan. If you aren't covered by an employer-sponsored plan, you will likely get a tax break on your contributions today, but pay later when you begin to withdraw. The limit for both the Roth IRA and Traditional IRA is $5,500 a year. There’s still time to contribute for 2016, the deadline is April 17, 2017. While you’re at it, set up recurring automatic transfers from your bank account to your IRA to make sure it gets funded every year going forward. To fully fund your Roth IRA, contribute approx. $458/month.
3. Increase your retirement contributions by 1%.
Log in to your 401(k) or any other employer-sponsored plan and increase your contributions by (at least) 1%. Commit to repeating this step every year and you'll be making a smart money decision without noticing effects in your day to day life. You should however already be contributing enough to get your employer's match. Not taking advantage of a match is essentially leaving free money on the table.
NOTE: If you are a Stash Wealth client, skip this step and refer to your Stash Plan™ for your optimal retirement contribution number.
4. Check your credit score.
Your credit report tells potential lenders, landlords, or employers just how responsible you have been with credit in your past. Basically, how much of a risk are you? You can request a free copy of your credit report once a year at annualcreditreport.com. Once you receive your report, you should check for inconsistencies and fraud. Aim to build up a credit score of at least 700 or higher, but ideally above 750. A poor credit score can cost you thousands of dollars in the long run by preventing you from qualifying for a lower interest rate when purchasing a home or auto.
5. Take care of your health.
Open enrollment has begun for HealthCare.gov and many employer-based insurance plans. This enrollment period allows you to enroll for the first time if you need coverage, re-enroll, or make changes to your insurance coverage. Take the time to make sure you have appropriate coverage for your needs before the New Year. Do you have unused money in a Flexible Spending Account (FSA)? If so, it's time to make those doctor appointments you've been putting off and refill any prescriptions you need. Pay for these qualified expenses with the money in your FSA before you lose it.