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Ka-ching in the new year: Killer ideas for end of the year financial action

Published: Monday, Nov. 26 2012 10:05 p.m. MST

The end of the year is a great time to go over a budget and other financial issues. (Deseret News photo illustration) The end of the year is a great time to go over a budget and other financial issues. (Deseret News photo illustration)

Don't even think about New Year's resolutions yet. Before people plot out their financial plans for future success, the end of the year needs some attention.

From advice about investments and new taxes to simple holiday spending plans, financial experts offer up a few simple action items that may turn "ringing in the new year" to "ka-ching in the new year."

Taxing problems

Eric Bell in Washington, D.C., is the founder of YoBucko.com, a personal finance website for young adults. He says people should try "tax gain harvesting."

"That's right," he says. "Harvest your gains."

If people have assets such as stocks and investments that have increased in value, they may consider selling them now (i.e. harvest them) to avoid higher taxes next year. This is, of course, only one factor to consider in looking at investments.

Budgeting and other financial issues could use some attention at the end of the year. (shutterstock) Budgeting and other financial issues could use some attention at the end of the year. (shutterstock)

Kevin Townsend, a wealth management adviser with Merrill Lynch in Salt Lake City, says, "People want to look very closely at the landscape that will change in regards to taxation of assets." People need to see if this is a good time to sell these assets, he says.

"The laws are going to be changing in January 2013, and there are some real benefits this year that people really need to look at with their accountant or estate planning attorney," Townsend says.

The changes that are expected and/or possible range from the tax implications of the Patient Protection and Affordable Care Act to increases in capital gains taxes to reductions in deductions.

Scott C. March, the owner of Scott Marsh Financial, a registered investment advisory firm based in Salt Lake City, also has some tongue-in-cheek tax advice for the end of the year. He thinks taxes are going to go up next year — and so recommends postponing deductible expenses so they could be used next year.

Don't even think about New Year's resolutions yet. Before people plot out their financial plans for future success, the end of the year needs some attention. (shutterstock) Don't even think about New Year's resolutions yet. Before people plot out their financial plans for future success, the end of the year needs some attention. (shutterstock)

"If you are going to have another baby," he says with a laugh, "wait until next year."

Andrew Schrage, a financial blogger at MoneyCrashers.com, says the end of the year is a good time to make a donation.

"Make a quick run through your house and check all the closets and drawers for things you no longer need," he says. "Create a list of what you have, value it accurately and donate it to an IRS-approved charitable organization. Then you can write off that amount on your taxes."

Bell says the end of the year is a great time to begin preparing taxes.

"Every April, millions of people scramble at the last minute gathering their paperwork, tax forms and financial information in order to prepare their taxes," he says. "Save yourself the headache next year and start organizing your files now."

Budgeting balancing

Townsend says people should look at their overall asset allocation in their investments to make sure they are balanced the way they want them to be. It is the old adage about not putting all your eggs in one basket — a balanced investment portfolio spreads the risk and rewards around. For example, someone may have planned to keep just 50 percent of their investments in stocks. Those stocks may have grown so much over the last year that they now are 60 percent of the investments. Townsend says a person may want to rebalance the portfolio by bringing it back down to 50 percent.

Schrage says people should create a budget if they are not using one. "Create a list all of your monthly sources of income, and then create a list of all monthly expenses," he says. "The obvious goal is to spend less than you earn."

As part of this, Schrage says to review all monthly bills. "Many service providers, banks and credit card issuers have instituted a variety of new fees," he says. "Take a good hard look at all of your monthly bills to see if any of these have appeared. If so, call your provider to find out what you need to do to have them eliminated."

As you go through your budget and bills, Shrage says this is also a good time to create a sensible filing system for finances. It will make tax filing easier.

Holiday budgeting

Marsh says people should plan their holiday spending before they shop. A new survey by CreditDonkey.com asked people if they planned to spend more or less on holiday shopping than they did last year. Of those who responded, 50.7 percent said they would spend less, while 31.5 percent said they would spend more. Marsh is skeptical.

"Every year people plan on paying less," he says. "By the end of the holidays, they end up paying more."

Marsh said people can spend less by planning now on what gifts they are going to buy. Thinking ahead means you can find presents more suited to the people on your gift list, Marsh says. He also said research by Stanford University showed people don't appreciate more expensive gifts, so people can spend 20 percent less and make an impact.

Planning ahead also gets rid of the last-minute expensive but less thoughtful present.

"You walk into a store and you don't know what to buy," Marsh says. "You haven't thought of anything in advance — you haven't incorporated all the creative things that will provide value for the gift without it having to cost a lot. If you don't know what you are going to get your wife the day before Christmas, what do you go buy her? You don't sit around and think, 'What would she like? What would she use?' You walk in and buy her jewelry. And it is the one thing that will be far more expensive."

Bell says it's easy to lose sight of spending habits in the holidays. "Parties, presents and travel expenses can really add up," he says. "But there are a lot of great ways out there to keep track of your expenses these days."

Townsend also says people need to avoid spending too much this time of year. "I strongly encourage people to set a budget now for what they want to spend during the holidays and really try to adhere to that," he says. "Deal with financial things financially and emotional things emotionally. That will help prevent things down the road."

Dinner Table Conversations

Dinner table conversations. They are those rare moments when parents can talk with their children about the day's events. Here is an article we think your family may enjoy reading and discussing. What are your thoughts?

  1. Why is it so important to financially plan ahead?
  2. How can your family save on money this holiday season?
  3. Why is a budget so important?

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