Smart Investing

10 financial steps to take now for a fresh start in 2018

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It may only be early autumn — and, in many parts of the country, still feel like summer — but winter, New Year's Eve and then 2018 will be upon us before we know it. Looking ahead to the annual fresh start that New Year's Day affords us all, the National CPA Financial Literacy Commission of the American Institute of Certified Public Accountants has drafted a list of 10 financial year-end tips to help readers prepare for a financially sound 2018.

— By CNBC's Kenneth Kiesnoski
Posted 16 October 2017

Consider tax strategies

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"If you expect your tax bracket to rise or fall in the current year — for example, if you've recently retired or started a new job — it might make sense to consider opportunities to accelerate deductions into the current year or postpone them to 2018. For example, if you're in a higher tax bracket in 2017 than you expect [to be] in 2018, a donation to charity in December may provide a better tax benefit than if you wait until January. A qualified CPA tax advisor can help you evaluate whether it makes sense to plan the timing of items that can affect your tax bill to fall before or after the end of the year."

Source: American Institute of Certified Public Accountants

Review your investment mix

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"Are your investments still in line with your goals and risk tolerances? Changes in the values of your stocks, bonds and other holdings over the past year may have moved the relative weights away from what best meets your needs. For example, if the stock market had a good year, the percentage of your investments in stocks may have drifted upward from what you see as the right proportion of stock market risk. The approach of the new year is a good time to review your mix. A qualified CPA financial advisor can help you determine if it's time for rebalancing."

Source: American Institute of Certified Public Accountants

Review all insurance coverage

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"Take a look at your coverage for auto, home, liability, etc. to be sure you have enough — and not too much — and that you're not overpaying. Look at whether you could drop some deductibles to save on premiums or if you have some unnecessary 'extra' features in your policy that are adding up. Comparison-shop among insurance companies to see whether switching makes sense. Even if you've done this before, it pays to compare periodically, as different companies adjust pricing frequently to meet competition or get more competitive at times in certain markets."

Source: American Institute of Certified Public Accountants

Review your retirement-plan contributions

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"If you haven't been contributing to your 401(k) plan at work at a level that gets you the maximum employer match, check on whether there may be a 'catch up' opportunity before year-end to avoid leaving money on the table. Similarly, it might make sense to increase your IRA contributions if you haven't reached the limit for the year in order to take full advantage of this year's opportunity to put away retirement savings dollars for tax-deferred growth."

Source: American Institute of Certified Public Accountants

Review your beneficiaries

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"Especially if you've had a recent family event such as a marriage, birth or adoption of a child, new grandchildren or a divorce, the approach of the new year is a good opportunity to make sure the beneficiaries you've designated in your life insurance, will, bank accounts and IRAs are aligned with your current situation and wishes."

Source: American Institute of Certified Public Accountants

Get your budget in shape

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"A budget that maps out your expected income, fixed expenses such as rent or mortgage and car payments, what you plan to set aside for savings, and what's available for everything else you may want can help you stay on track toward your financial goals. If you don't already have a budget, the new-year milestone is a great time to start. If you're already using a budget to help manage your finances, a year-end tune-up can help you make sure it's still current."

Source: American Institute of Certified Public Accountants

Leverage technology to automate savings

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"Whether it is an app or a desktop program, there are many programs and technological tools, many of which are free, that can help you automate your savings and spending plans. Automating these processes means you don't have to remember them every time, and that by itself can increase your chances of success."

Source: American Institute of Certified Public Accountants

Plan out your goals, and get a budget buddy

Fiduciaries have important responsibilities and are subject to standards of conduct because they act on behalf of retirement-plan participants and their beneficiaries.
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"Simply saying you want to save more money may be enough to get you started, but taking the time to differentiate your short-, medium- and long term will help keep you focused and on track through the inevitable bumps in the road. Thinking of your budgeting process like a long-term exercise program makes sense — improving your finances is a long-term commitment. Partnering with someone else on the same journey will make this process easier, and you can motivate/support each other along the way."

Source: American Institute of Certified Public Accountants

Use it or lose it

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"If you have a flexible spending account that requires forfeiture of funds for the current year if not used for qualified expenses, consider whether you're on track to take full advantage of what you've set aside before the forfeiture deadline approaches. For example, your plan may have a grace period that allows funds to be used until March 15 of the coming year, with forfeiture of anything remaining afterward. If you have substantial remaining flexible-spending funds for this year, consider whether it makes sense to get your new glasses or dental work done before the deadline."

Source: American Institute of Certified Public Accountants

Health insurance open enrollment

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"If you purchase your own health insurance — for example, if you're self-employed or have a Medicare Supplement plan — watch for open-enrollment periods that may provide an opportunity to shop around for better coverage, cost savings or both."

Source: American Institute of Certified Public Accountants