PERSONAL FINANCE COMMENTARY
4 Things You Must Get Done This Month
By Dan Caplinger
December 1, 2009
With Thanksgiving solidly behind us, the year is quickly
coming to a close. Before you start thinking about how to
make 2010 your best investing year ever, though, make
sure you don't miss out on some year-end opportunities to get
your finances into shape for the New Year.
1. Get a clue with your taxes
If you thought that you didn't have to think about your
taxes until April, think again. Although you have lots of
time before you have to
fileyour returns, you lose most of your chances to
reduce your tax bill once the apple drops.
In particular, look out for the following:
Take your losses. Whether you have gains on
other stocks or just want to take losses against your other
income, you'll want to
harvest your tax lossesby the 31st. You can use any
capital losses on stocks you sell to offset all your gain
on sold stocks, plus you can use up to $3,000 more to
reduce your taxable income.
Max out your deductions and credits. You
can cash in with a number of provisions, from
donating to charityand
buying a home for the first timeto making your home
more energy-efficientand prepaying state income and
real estate taxes. But you've got to write your checks
before year's end or you'll lose your chance. Also, before
you get excited about deductions, make sure the
AMTwon't wipe out your potential tax savings.
By paying attention to your taxes now, you'll have a lot
more success cutting your tax bill.
2. Get right with your retirement
It's a resolution that many people made back in
January:
Save more for retirement. Yet between the financial
crisis, the recession, and skyrocketing unemployment, you
might not have followed through on your savings plans quite
as thoroughly as you had expected.
If you do have the financial means to get savings into
your retirement plan, however, now's the time to do it. For
instance, this year, anyone can save as much as $16,500 in a
401(k) planat work, and those who are 50 or older can
stash away as much as $22,000. On Dec. 31, though, that
opportunity goes away -- and while you'll have another chance
in 2010 to set aside a similar amount, missing out on a
year's worth of contributions can make a big difference to
your retirement.
Moreover, if you don't contribute now, you might be
missing out on
free money. Although many companies
cut backon their 401(k) matching contributions over the
past couple of years, several, including
American Express (NYSE: AXP),
Motorola (NYSE: MOT), and
JPMorgan Chase (NYSE: JPM), have announced
plans to reinstate matching in some form. You can't get a
match, though, if you don't contribute yourself.
One final thing: If you're wondering whether to contribute
to a 401(k) or your IRA, keep in mind that the deadline on
IRA
contributionsis April 15. So if you're planning to
contribute to both, you have some extra time before the IRA
deadline to add money -- focus on your 401(k) right now.
3. Spend your flex money
Flexible spending accountslet you set aside pre-tax money
to spend on medical bills and related expenses. Yet while
many flex plans now let you spend money until March 15, some
companies still retain the old year-end deadline. Check with
your employer and make sure you use that money before you
lose it.
4. Start investing right
A lot of people have taken a long vacation from dealing
with their portfolios in the aftermath of the financial
crisis. Now's the time to take the reins again and get back
in control of your finances.
What exactly should you do? Well,
rebalancing your portfolioin December can make a lot of
sense, especially in combination with managing your taxable
gains and losses. Here's an example: If soaring financials
like
Bank of America (NYSE: BAC) and
Wells Fargo (NYSE: WFC) have increased the
risk level of your portfolio, for instance, consider
diversifying into blue chips in other sectors such as
PepsiCo (NYSE: PEP) and
Johnson & Johnson (NYSE: JNJ).
Moreover, ensuring your portfolio is
properly diversifiedcould help you enhance returns with
lower risk. That means making sure you have some
international stocks as well as investments in companies of
various sizes and sectors, as well as money in other assets
like bonds, real estate, and commodities. That way, you won't
have all your eggs in one basket if the stock market starts
heading down again.
Make a list
December is a busy enough month without adding a long
list of financial to-dos. But if you follow these simple
steps, they'll pay off for years to come.
Be careful about the stocks you get rid of. Joe Magyer
explains how he
lost a fortune by selling this stock.
This article was originally published as
4 Things You Must Get Done This Monthon
Fool.com
Copyright © 2009 The Motley Fool, LLC. All rights
reserved.
Published on December 1, 2009
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