5 Important Financial Actions to Take Before the End of the Year

By Marjorie L. Rand, CPA, CFP®, RICP®

2021 came with a lot of hopes—mainly hope that the pandemic would end and life would go back to normal. But as the past year has shown us, uncertainty can extend far beyond 2020. Concerns about inflation, potential tax changes, and new COVID variants have many people wondering if next year will be any better. Although these are valid concerns, when it comes to your personal finances, 2022 does not have to follow in the same footsteps as the last two years. There are many ways to take back control of your finances and set yourself up for a successful future. Make sure all your bases are covered before the end of the year with these 5 tips.

1. Review Your Taxes

One of the most important actions you should take heading into 2022 is to review your taxes and make any necessary changes in light of the possible passage of the Build Back Better Plan. (1) This bill has far-reaching implications for people in all tax brackets and it’s important to review how your financial plan may be impacted. Some of the changes to be aware of include:

Increased business taxes
New surtax on Americans making more than $10 million per year
New cap on state and local tax (SALT) deductions
Common tax-advantaged retirement strategies, including Roth conversions and backdoor Roth IRAs, could be eliminated or strictly regulated

If you have significant estate assets, are planning to retire, or you are expecting substantial capital gains in the next few years, be sure to review your plan with a financial professional to ensure you are taking steps to mitigate any potential risk.

2. Review Your Asset Allocation & Invest With Impact

The end of the year is also a great time to review your asset allocation strategy and incorporate ESG and impact investing if desired. Given the dramatic rise of inflation over the last few months, it’s crucial that you evaluate your investments and make sure your portfolio is properly diversified. It should also be tailored to your specific risk tolerance level, ensuring that you are earning enough returns to keep up with inflation, but you are not overexposing yourself to risk.

If you are interested in using your funds to support environmental, social, or governmental issues (ESG), you can also consider impact investing as a way to earn returns while also promoting change on causes you care about.

3. Consider Charitable Donations

Charitable donations are another option that can be reviewed as the year-end approaches. The holidays are a great time to give money and assets to your favorite non-profits, churches, and organizations.

Charitable donations can be used as part of your overall tax strategy, or as part of a comprehensive estate plan. Both strategies provide many potential benefits, including supporting causes you care about, reducing your taxable income, and lowering your taxable estate.

4. Use Up Your Employee Benefits

While every employee benefit plan has its own rules and regulations, many of them expire or reset at the end of the year. You worked hard for these perks, so be sure to use them before it’s too late!

Medical and Dental Benefits

Now's the time to take care of all your healthcare needs before your deductible resets. Dental plans in particular often have a maximum coverage amount. If you haven’t used the full amount and anticipate any treatments, make it a priority to set an appointment before December 31st.

Flexible Spending Account

Like your health insurance benefits, you’ll want to use up as much of your FSA (flexible spending account) dollars as possible by the end of the year since you are only allowed to carry over $500 each year.

Sick and Vacation Time

Depending on your company, your sick or vacation time might expire at the end of the year. Check with your HR department to learn about any expiration dates. If it does expire, fit in a last-minute staycation or take some time off to work on projects you’ve been delaying. If you need to make any trips to the doctor, schedule those appointments now to make use of paid-time-off benefits before you lose them.

5. Revisit Your Plans and Policies

Lastly, take another look at your estate plan and insurance coverage. If you took the time and energy to create an estate plan, check it periodically to ensure all the documents are up to date and no major details have changed.

Your insurance needs may also change as the year goes by, so periodically review your coverages and designated beneficiaries to reflect your current financial situation. For example, if you paid off debt, you may not need as much life insurance coverage since your family’s liabilities have decreased. You might also want to evaluate your need for other types of coverage, such as long-term care or disability insurance.

Partner With a Professional

After the last couple years of feeling like everything is out of control, let’s focus on what you can control. I can help you rein in your finances, and together we can achieve your financial New Year's resolutions in 2022! Schedule a 20-minute introductory call or reach out to me at 908-895-2406 or marge@randfinancialplanning.com today.

About Marge

Marjorie Rand is founder and financial advisor at Rand Financial Planning, a comprehensive, fee-only, fiduciary financial planning firm. Marge specializes in helping her clients plan for a secure retirement and navigate life’s many transitions through customized, tax-efficient retirement planning. She is passionate about empowering her clients to make the best financial decisions for their life and being by their side no matter what life throws at them. Marjorie spent many years as a CPA before founding Rand Financial Planning so she could be a go-to source for all her clients’ financial needs and help them avoid costly mistakes. She has a bachelor’s degree in accounting from Rutgers University and a Master of Science in Taxation from Fairleigh Dickinson University, along with the Retirement Income Certified Professional® (RICP®) and CERTIFIED FINANCIAL PLANNER™ certifications. When she’s not working, Marge enjoys boating, horseback riding, traveling, and hiking with her husband and her dog, Rangeley. To learn more about Marjorie, connect with her on LinkedIn.

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(1) https://rules.house.gov/sites/democrats.rules.house.gov/files/BILLS-117HR5376RH-RCP117-18.pdf