It may seem several weeks away but New Years Day will arrive faster than the indigestion you get from the fruitcake you indulge in during holiday season. And while you want to stay on your couch watching Christmas movies, you need to head over to the office desk and start clearing your finances for the beginning of January.
“Oh,” you say, “I can wait until after New Years Day, in January.” Let’s think about this for a moment. In January you have to start handling health bills not covered by your deductible, possible annual HOA or sewer bills, and the potential cleanup of your Christmas spending. Do you feel you’ll have time to sort through all your tax information before your statements start coming through the mail? If you’re a compulsive organizer, sure. But not if you’re generally disorganized.
Despite the dinners, shopping, and general merriment, December is a fairly slow time of the year. This is especially true in the limbo week between Christmas and New Years Day. That’s the perfect time to do a number of things to help you get ready for the next financial year.
Make your donations.
All those bags and boxes you said you’d donate to Goodwill or Arc? Time to pack them in the car and make one or multiple trips to donate them. And you need to list what you donated, else it’s going to be hard to detail it all on your tax form or in a program like TurboTax. The end of the year is also a good time to make your cash donations toward various non-profit organizations. By the way, check with all of these locations to see which ones are tax deductible.
Make your contributions.
Yes, you have until April 15 to make your maximum donations to IRAs and other tax-deductible investments; however, do you really want to wait that long? Work before New Years. Throw everything you can into your 401(k) and tax-deductible IRAs to lower your gross pay and have some additional investments to lower your liability.
Clear out your receipts.
Pull out the shredder or box to add documents for someone else to shred – yes, before New Years Day! It’s time to clean out all those items you no longer need. This includes the previous year’s paycheck stubs, bank and brokerage statements, receipts for healthcare bills, and utility bills. Actually, you hold onto seven years of utility bills should you be deducting a home office from your taxes.
You can also discard those old credit card statements and incidental receipts you saved in case you needed to return something to the store. Make sure you keep your tax returns, IRS forms, receipts for capital improvements, annual statements from your brokerage firm, and any bills for big ticket items. Doing this will keep your file cabinet, real or virtual, prepped for the incoming year.