This Week In Your Wallet: Your Year-End Financial Checklist & Holiday Shopping Budget
We’re less than two months out from 2015, making now the perfect time to put your year-end financial checklist together. For that list, The Wall Street Journal offers eight moves to consider before the ball drops.
Start with cashing in your losses. Yes, the S&P 500 index has risen nearly 10%, and some mutual funds are said to make big taxable distributions this year. But for your stocks, bonds and mutual funds that aren’t doing so hot — the ones trading far below what you paid for them — it might be worth selling them to offset capital gains. However, this isn’t a move to make without guidance, which is why consulting a financial advisor or tax preparer is recommended by the Journal (and me).
Another tax saving tip is to pay January’s mortgage early. If your payments are scheduled for the beginning of each month, then change this January’s payment date to December 31, 2014 to receive an extra month’s interest deduction on your tax return. Moreover, if you’re going to be in a low federal tax bracket this year, then it might be a good time to convert your traditional IRA to a Roth IRA. Your conversion will be taxable this year, but after that the money will grow tax-free. As financial planner Ann Gugle says in the article: “‘Pay taxes at a lower rate today…in exchange for tax-free growth in the future and no required minimum distributions in your lifetime.’”
Also, make sure you don’t miss out on the savings you’re entitled to, like frequent-flier miles through an airline rewards program. Read the fine print so that you don’t miss the expiration date, which is often the end of the calendar year.
And for the other news this week…
Making room in the holiday budget
Thirty-five percent of Americans plan to adjust their savings and investing strategies in order to make room for year-end holiday spending, according to a new study from Edward Jones. Women are more likely to do this than men (40 percent compared with 30 percent), and 18-to-24 year olds are about twice as likely than those 65 or older to make these adjustments (43 percent compared to 24 percent). Of the people surveyed, some 39 percent are already stressing about settling their debts during the holidays, too. If that’s you, then save yourself the stress (and money) by creating a holiday shopping budget.
One way to start is by writing down everyone on your list, what you’d like to purchase for them and how much you want to spend on each person. Otherwise, you’re more likely to forget someone, panic and spend more at the last minute. From there, decide on a reasonable budget, both overall and for each person. I suggest limiting your spending to 1.5 percent of your take-home pay, which can be divided among the people on your list. If this doesn’t seem like enough, then combine forces with a friend or relative to up the ante while keeping in line with your budget.
Shop with credit card benefits in mind
Before you hit the stores for holiday shopping, you should also know what you’re working with. I’m talking credit card benefits, many of which can help you save money on — and protect — your purchases. For instance, cards from MasterCard, Citi and Discover all offer price guarantees that put money back in your wallet if you see the item you purchased for less. With Discover, you can get the difference refunded up to $500 within 90 days of making the purchase on the card. Citi will refund up to $300 within 60 days, and MasterCard $250 within 60 or 120 days, depending on the card. Benefits like extended warranties and guaranteed product returns exist too. The thing is —as DailyFinance reports —not many people even know they have these benefits.
That’s why it’s important to look at the card’s disclosure statement, which is where you’ll find all of your card’s perks, and most importantly, the guidelines and terms for tapping into them.
Buy a car that holds its value
One of the biggest purchases you’re likely to make in your lifetime is a car. And let’s get one thing straight: A car isn’t an investment. You’re not likely to ever recoup the full purchase price, no matter what vehicle you choose. (The average price for a new car in 2013 was over $32,000.) If you’re putting that kind of money on the line, it pays to pick a vehicle that holds its resale value. How do you find one? In this week’s Bankrate video, I tell you.
Know that by the end of the first year, most cars depreciate an average of 30 percent, even with minimal wear, tear and mileage. But there are vehicles that hold their value better than others. It can be hard to predict how much a particular make and model will depreciate, but you can get an idea by searching online for historical pricing data. A dealer will also advertise if a car is known to depreciate well, though you’ll want to fact-check. As a general rule of thumb, American cars depreciate faster than foreign models.
Before you hit the lot, also factor in where you live. Sure, imagining yourself cruising around Wisconsin in a convertible sounds nice, but it’s also a minority model in the state, which drives down its resale value. The same goes for four-wheel drives in Florida. Consider the climate and terrain of your area when making your purchase. Check out the video for the rest of my tips.
Have a great week,
Jean
