Financial Year-End Planning: 6 Moves to Make Now

By Chris Palabe, CFS®, AIF®

With the new year just around the corner, it’s a good time to settle outstanding financial matters. Here are six year-end planning moves that can enhance your financial stability and create future investment opportunities.

1. Add to Your Emergency Fund

Many financial advisors suggest keeping a fund covering three to six months of living expenses in case of unexpected emergencies. At the end of the year, it’s worth increasing your fund by adding leftover money to it. 

Taking this step puts your emergency fund in good shape for the turn of the year in case of medical expenses, car repairs, and other surprises. Some people add their entire end-of-year bonus checks to their emergency funds—a quick and easy way to be pragmatic.

2. Use Up Your Flexible Spending Account Money

Flexible spending accounts (FSAs) are tax-advantaged investment vehicles that pay for certain health-related expenses, such as:

• Prescriptions
• Co-payments
• Dental work
• Vision care
• Childcare

However, most FSAs come with a “use it or lose it” policy. In other words, if the funds aren’t entirely spent by the end of the year, they’re forfeited and inaccessible. The end of the year is a good time to take care of any health issues covered by your FSA so you don’t lose value.

3. Max Out Your Tax-Advantaged Investments

IRAs are subject to annual contribution limits; in 2024, that number is $7,000. However, some account holders don’t meet the yearly maximum, leaving their retirement funds at only part capacity. 

Check your accounts to verify how much you’ve contributed so far this year. If you find a gap, close it by maxing out your contribution. If you have a 401(k) plan, check with your employer or online to confirm you’ve met your annual contribution limit.

4. Pay Down High-Interest Debt

Credit cards, payday loans, and other debts can put a strain on your finances. The annual percentage rates (APRs) for these types of debts can exceed 15%. When left unhandled, the compound interest can get out of hand before you know it.

To avoid starting the new year with a financial drag, pay off as many high-interest debts as you can and lessen your debt load. Not only can doing so free up more cash in the future, but you’ll also do your credit history a big favor.

5. Adjust Your Investment Allocations

Year-end planning involves reallocating your investment funds to boost your potential and diversify your holdings. Before the end of the year, have a look at your portfolio positions and look for areas of concentration in certain sectors, industries, or regional investments. 

Sell some shares in over-represented investments and shift the proceeds to another one. Alternatively, you might consider taking a position in a new investment. 

6. Donate to Charity

For many, the end of the year is a time for reflecting and doing good deeds. It’s very easy to do good in the world by making charitable donations—and receiving tax breaks for your efforts. Again, consider giving all or part of your annual bonus to a charity or organization you support during year-end planning.

Get Help With Year-End Planning

At Palabe Wealth, it’s our goal to help our clients create a plan for their financial future that helps them feel more confident. Our powerhouse team can help with year-end planning and your overall retirement plan.

Schedule a 20-minute introductory phone call or call us at 847-249-6600 to learn if we are the right fit for your financial goals.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA. (22-LPL)

Asset allocation does not ensure a profit or protect against a loss. (34-LPL)

All investing involves risk including loss of principal. No strategy assures success or protects against loss.

This material was prepared for Palabe Wealth Inc.’s use.