As the end of the year approaches, it’s important to take some time to reflect on your financial situation and make any necessary adjustments before the start of the new year. With the end of the year quickly approaching, now is the perfect time to evaluate your financial health and make any necessary adjustments before the new year begins.
As a freelancer or independent contractor, you may receive a paystub 1099 form to report your income, but it’s essential to understand the difference between the two, as a paystub typically reflects income earned from an employer, while a 1099 form reports income received as an independent contractor, and the way you handle taxes for each can differ significantly.
The following 7 end of year financial tips can help you take control of your finances and set yourself up for a successful year ahead.
1. Review Your Budget
The very first step in gaining financial control is to analyze your budget. Take a look at how much money you earned and spent throughout the year and compare it to your budget. Did you stick to your budget or did you overspend in certain categories?
If you overspent in certain categories, it might be time to adjust your budget for the upcoming year. Look for areas where you can cut back, such as eating out or entertainment expenses, and allocate more funds to areas that are important to you, such as your retirement savings or travel expenses.
2. Maximize Your Retirement Contributions
If you have a 401(k) or IRA, it’s important to make sure you’ve contributed the maximum amount allowed for the year. If you haven’t, consider making a lump sum contribution before the end of the year to take advantage of tax benefits and maximize your retirement savings.
For 2021, the maximum contribution for a 401(k) is $19,500 for those under 50 and $26,000 for those over 50. The maximum contribution for an IRA is $6,000 for those under 50 and $7,000 for those over 50. By maximizing your contributions, you’ll not only save for retirement, but also reduce your taxable income.
3. Review Your Investment Portfolio
The end of the year is a good time to review your investment portfolio and make any necessary adjustments. Take a look at your asset allocation and see if it aligns with your risk tolerance and financial goals.
If your investments are too risky, you may want to consider reallocating some of your investments to safer options. On the other hand, if your investments are too conservative, you may be missing out on potential returns. Consider speaking with a financial advisor to ensure your investment strategy is aligned with your financial goals.
4. Make Charitable Contributions
If you’re planning to make charitable contributions before the end of the year, make sure you do so before December 31st to take advantage of tax benefits for the current year. Charitable contributions can help reduce your taxable income and provide a much-needed boost to organizations in need.
Consider making a charitable contribution to an organization that aligns with your values and goals. You can also consider donating appreciated stock, which may provide additional tax benefits.
5. Check Your Credit Report
It’s important to check your credit report at least once a year to ensure it’s accurate and free of errors. Review your credit report for any mistakes or fraudulent activity and dispute any errors with the credit reporting agency.
A mistake on your credit report can have a negative impact on your credit score and make it more difficult to obtain loans or credit in the future. By checking your credit report and disputing any errors, you can ensure that your credit score is accurate and you’re not penalized for any mistakes or fraudulent activity.
6. Take Advantage Of End-Of-Year Sales
If you’re planning to make any large purchases, such as a car or appliance, consider taking advantage of end-of-year sales to save money. Many retailers offer discounts and promotions at the end of the year to clear out inventory and boost sales.
Before making any large purchases, be sure to do your research and compare prices. You may be able to find a better deal by shopping around or waiting for a better sale.
7. Plan For The Upcoming Year
As the year comes to a close, it’s important to start thinking about your financial goals for the upcoming year. What financial goals do you have for the upcoming year? Do you want to save more, pay down debt, or invest in a new opportunity?
Take some time to review your financial goals and create a plan for how you will achieve them. Consider setting specific, measurable goals, such as saving a certain amount of money each month or paying off a specific debt by a certain date.
In addition to setting goals, consider creating a budget for the upcoming year. This will help you stay on track with your spending and ensure you’re making progress towards your financial goals. Be sure to factor in any changes to your income or expenses for the upcoming year.
The end of the year is a great time to take control of your finances and set yourself up for success in the upcoming year. By following these 7 ends of year financial tips, you can ensure that you’re on track to achieving your financial goals and making the most of your money. One helpful tool that can assist in managing your finances is a paystub creator. This tool allows you to easily generate paystubs for yourself or your employees, which can be helpful for tracking income and expenses, preparing taxes, and ensuring accuracy in your financial records.
Remember to take some time to reflect on your financial situation and create a plan for the upcoming year. With a little effort and planning, you can set yourself up for a successful financial future. Consider sharing these tips with family and friends to help them achieve their own financial goals and start the new year on the right financial foot.