Your EOY Financial Checklist

 If the pandemic has taught us a thing, it’s that it pays to be prepared. We made you a list of key money moves to finish the year strong and set yourself up for success next year; all you have to do is check it twice.

Q: Is there an EOY health check of my money I should do to get ahead in 2021?

Check 401(k) and IRA Contributions

A refresher of your retirement account options is here.

Yes, starting to save for retirement now is KEY. Why? Both 401ks (retirement accounts linked to your employer) and IRAs (retirement accounts you open by yourself) limit how much you can contribute every year. You can make your annual contributions up until - you guessed it - Dec. 31st. If you miss that deadline, you miss the opportunity to invest money into the account (with tax benefits!). Every year missed is a year of playing catchup later.

Easy math: If your goal is to have $1M at age 65 and, starting at 20, you invest ~$3000 each year (just $250 a month), you're highly likely to hit the million-dollar goal because, compounding interest (AKA when investment "returns" is calculated against a larger and larger base). The average stock market return has been about 10% per year for nearly the last century.

Check your FSA

🍹 Refresher - What is an FSA? FSA stands for “flexible spending account”. It is a type of health insurance plan that gives you a bank account for you to transfer your income dollars to, free of tax. BUT, you can only use the money for qualified health purchases (ie. medications, vitamins, doctors visits, etc).

Why does that matter for year-end? FSAs work under the motto of “use it or lose it”. Most run a full calendar year. If by Dec. 31st you have money left over, you’re unlikely to be allowed to use it in 2021. 

Depending on your plan, most FSAs offer two options:

(1) The ability to roll over a max of $500 to the next year (you still lose what’s in the account over that)

(2) A grace period of 2½ months to spend what's left

Check to see if any of the above applies or go ahead and get spending on your health!

Charitable Giving

Uncle Sam likes to give pats on the back for doing the right thing, like giving to charity. When you do, you can use the amount to offset your tax bill. But in order to count, the contribution must be made in the same year that you are paying taxes. So for your 2020 tax bill (due on the annual April 15th Tax Day each year) donations must be made by Dec. 31st 2020.

So, if there’s anything good about the longest year ever not being over yet, it’s that you have a little time to set yourself up for a smoother ride in 2021.

Some other loose ends to tie up

✓ Download your monthly statements - How did you do spending wise? Did you generally land around the 50/30/20 rule.

✓ Grab yourself a free credit report - head to CreditKarma to get a free credit score report (this won’t negatively impact your score) to start off 2021 in the know.

✓ Check in on your emergency fund. How much is in there? Good rule of thumb: take your November spending and multiply it by 6 - this is the amount emergency fund.