With the end of the year fast approaching, it's a good time to take stock of your financial situation as you head into 2021. 2020 was a strange year and a difficult year for many people. As the health and / or livelihood of many people is affected by COVID-19, the situation for many people is very different from January. As you head into a new year, there are a few things you can do to improve your finances before the end of 2020.
# 1 Put at least $ 1000 in an emergency fund
If you haven't set up an emergency fund to handle unexpected expenses, this is a good first step in getting yourself on a solid financial footing. $ 1000 may not be enough to solve all sorts of problems, but it can be enough to deal with a breakdown of your car or unexpected housekeeping expenses. If you don't have a minimum emergency fund, make a plan on how to start one before the end of the year.
# 2 Fund your retirement accounts in full
401,000, IRAs, and other retirement accounts have an annual contribution limit that limits the amount you can contribute each year. Before the end of the year, take some time to go through each of your accounts with an annual contribution limit. Decide which of these accounts should be funded before the end of the year.
# 3 Donate to charity
With the increased standard deduction available in recent tax years, not as many people list their deductions. However, when listing your deductions, keep in mind that your charitable contribution may be tax deductible. If you make this charitable contribution before the end of the year, you may be able to deduct it in that tax year. Otherwise, you'll have to wait a full year before you can pull it off.
READ MORE: 5 Best Credit Cards When You Donate To Charity
If you have already made charitable contributions in 2020, make sure that these are documented and can be included in your tax return.
# 4 Make sure you have a financial security plan
Do you still use the same username and password on every website? It may be time to put in place a financial security plan. In the event of a data breach, there is always an opportunity to take some steps to minimize your risk in the event of a data breach or a hacker accessing your financial information. One thing you can do before the end of the year is to set up a password manager to add variety to your passwords. Another thing is to set up two-factor authentication (2FA) for your important financial accounts.
# 5 Check your credit report
Every year you are entitled to a free three office credit report from annualcreditreport.com and the end of the year can be a good time to do so. If you already have a Mint account, you will always have access to your credit history. However, verifying your actual credit report can make a huge difference to your credit report. Between 10 and 21 percent of people have errors in their credit reports, and cleaning up incorrect or inaccurate information can improve your credit score.
# 6 Are you consuming money in your FSA
Flexible spending accounts can be a great way to save money on health expenses. An FSA is usually set up by your employer and allows you to make pre-tax contributions. Any money you contribute to your FSA is not taxable, and you can use that money to get reimbursed for many different types of healthcare expenses. The only downside is that most of the FSA plans are Use-It or Lose-It plans. Any money left in the FSA at the end of the year will be forfeited. Review the details of your plan and make sure you use all of the money in your FSA before the end of the year.
# 7 Set your financial goals for 2021
After all, the end of the year can be a good time to set your financial goals for 2021. You don't have to wait until January to start a new resolution. Meet and talk to your spouse, family, or trusted friends and counselors. Decide where you want to be in a year, five years, and beyond, and take the necessary steps to get there.
Dan Miller (39 posts)
Dan Miller is a freelance writer and founder of PointsWithACrew.com, a website that helps families travel for free / cheap. His home base is in Cincinnati, but he tries to travel the world as much as possible with his wife and 6 children.