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Year-End Money Tips for 2015

By: Devan Robinson

The end of the year can be a stressful time for everyone, tax-season is looming and you may be wondering what you need to do with your investments.  Here are five tips to help finish out your financial year and give you a head start in 2016:

1. Examine Your Withholdings 

Your tax withholding is the amount you chose to be deducted from your paychecks to pay income taxes.  Are you getting big tax-refund checks every year? If so, you are likely withholding too much.  While it can seem fun getting a refund check, realize this is simply the government giving you back your money.  We believe that our clients can allocate and spend their money better than the government can.  Examining and adjusting your withholding is a simple change you can implement to put more money in your pocket immediately.

2. Consider Contributing to Retirement Plans

Money you contribute to certain retirement plans, such as 401(k)s and IRAs, can be used as deductions come tax time.  We briefly covered the basics of retirement plans in a previous blog post here.  Retirement plans can be a great way to lower your taxes today, while also setting yourself up for success down the road.

3. Harvest Tax Losses

Tax loss harvesting is a technique we use at Fairlead Financial Group to lower your tax-burden today and position your portfolio for success in the future.  Any time you sell an asset at a loss, you incur a capital loss that gets reported to the IRS.  While nobody likes losing on an investment, that loss can be a blessing in disguise.  You can strategically use capital losses to offset taxable capital gains (plus up to $3,000 in ordinary income) and they can be carried forward indefinitely.  This can amount to significant tax savings for you immediately and over-time.  If you think that tax loss harvesting may apply to your situation, talk to us first because it can be a complex process and is heavily regulated.

4. Rebalance Your Investments

The end of the year is a great time to meet with us and examine your goals and asset allocation.  Rebalancing is the act of examining your investments overall, comparing them to your plan, and making changes as needed.  This is a very important step that many investors overlook.  We have seen an abundance of portfolios that are out of balance recently; this is due to the strong market performance we have seen the past five years.  For example, five years ago you may have set up your investments to be fairly moderate, such as an allocation of 60% stocks/40% fixed-income.

Because the stock market performed so spectacularly those five years, your allocation could very well have shifted to 70% stocks/30% fixed-income now.  If you feel you would still like to be a moderate investor, you do not want to be caught in a market correction like the one we just encountered with an aggressive portfolio of mostly stocks.

5. Chronicle 2015’s Accomplishments

One principle we stress and encourage our clients to embrace is: the single best investment you can make is an investment in yourself.  Not enough people ask for pay raises and a lot of wealth gets left on the table as a result.  In an upcoming post, we will be outlining exactly how to earn and ask for a pay raise but for now, step one is to track your accomplishments this year.  It is important to make this a habit and to commit to doing it.  It is easy to forget all that we accomplish in our busy careers, and it pays big dividends to keep them all in a file.  Some examples of ideas to track:

  • Where did I go above and beyond this year?  Be as specific as possible.
  • What did I contribute this year that my peers did not?
  • If you worked on a special project or team, what did I/we do and what was the result? (The more quantifiable the better)
  • How have I improved as an employee this year?  This could be specifics such as courses you attended, or just in general how your experience has grown along with your efficiency and effectiveness.
  • Anytime that you are graded by a metric (any hard number that quantifies your work results), track your results.  Whenever you are beating a metric be sure to document it. This will translate to more money down the line.
  • Did I win any awards this year?
  • How have I helped other co-workers improve/grow?

If you or your family have questions on how to implement any of these tips in detail, you can schedule time to discuss them with us here with no-obligation.  We hope that readers and our clients have a great end to 2015 and that you are proud of the work you have done to make 2016 the best year yet!

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