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As we approach the end of the year, I have two main goals for my money. First, I want to try my hardest to not overspend on gifts or holiday outings, which can be hard when everyone around you is chanting “‘Tis the season to splurge on that $100 steak or $100 new pair of shoes.”
Second, I want to make sure I close out the year making any final strategic moves with my investments. Should I be doing something with my retirement accounts? How about the cash I saved up every month? What should I start planning now for next year?
To make sure I tie up any loose ends, I asked three financial advisors to share their top tips for what I should do with my money before 2021 ends.
1. Increase and automate contributions
One big thing to do before the end of the year, according to financial planner Henry Hoang is to spend this time finding ways to increase your net worth.
“If you are receiving a raise, be sure to increase your savings towards anything that will help increase your net worth,” said Hoang. “Most importantly, automate it.”
Some examples he gave included 401(k)s, Roth IRAs, and brokerage accounts.
“Lifestyle costs find a way to match take-home income, so paying yourself first is an underestimated strategy that will go a long way,” said Hoang.
2. Evaluate cash holdings
Financial planner Kristin McKenna said it’s important to evaluate cash holdings before the end of the year along with your investments.
“Investors shouldn’t try to time the market if they have extra cash to invest,” said McKenna. “But they do need to make sure they have proper cash reserves for taxes, emergency funds, and short-term goals.”
She recommends holding cash in high-yield savings accounts as opposed to
so that the money can earn a little interest, too.
3. Learn more about tax loss harvesting
For those already invested in the stock market, financial planner Brian Sweeney recommends using this month to potentially start tax loss harvesting, which lets you use your loss as an advantage.
“Since 2021 has been a very good year for the overall stock market and although many people don’t have too many losses to account for, the tax code is set to change in 2022,” says Sweeney. “Get ahead of the curve and start tax loss harvesting in your non-retirement accounts.”
You can start by speaking to a certified financial planner or CPA to make sure this is done correctly, according to Sweeney.
“Tax loss harvesting is a great way to reduce taxable income & rebalance portfolios,” he added. “This overall benefit can take the uncertainty around the future of taxes and