6 To make before year’s end
Before long, 2021 will be drawing to a close. As you look back over this past year, you can probably recall some smart financial decisions you made, and also some financial mistakes. While it's important to learn from your mistakes, you don't want to dwell on them for too long. Instead, you want to look ahead and keep moving forward. One way to do that is by making these six smart financial planning moves before the year comes to a close.
- Re-evaluate your emergency fund.
Financial planning experts recommend keeping between three and six months' worth of expenses in an emergency fund. Before the year ends, check your emergency fund and consider whether the amount you've saved is still adequate. If your family has grown, your expenses have increased, or your job stability has changed, then you may want to add to your emergency fund.
- Max out your IRA.
For 2021, people under 50 can contribute $6,000 a year to a traditional or Roth IRA. People ages 50 and over can contribute $7,000 a year. If you have not yet maxed out your IRA, making those last contributions is a great way to finish out the year. And if you can't quite contribute the maximum by the year's end, that's okay. You have until April 15th of the following year to make the past year's IRA contributions.
- Check your student loan repayment plan.
Hopefully, you've been making your student loan payments on time all year. Before the year is over, check your account and make sure the repayment plan you are on is still the best one for you. If your income has increased over the past year, then you may be able to make larger monthly payments and save yourself interest in the long run. If you've been struggling to make your payments, switching to an income-based repayment plan may help.
- Pay off your credit card balance.
If you have a rolling balance on your credit card, paying it off before the end of the year will be empowering. Credit cards can accumulate interest quickly, so you can save yourself a bundle by paying yours off. If paying off your credit cards by the end of 2021 is realistic, then at least figure out a repayment plan that enables you to pay them off throughout 2022.
- Consider refinancing your mortgage.
Check your mortgage interest rate. If it is higher than the rate banks are currently offering, then you may want to refinance. Refinancing your mortgage can allow you to save on monthly payments. It can also save you interest over time. Reach out to your bank and ask what refinancing options they offer. Then, consider shopping around at a few other banks for comparison's sake.
- Get new homeowners and car insurance quotes.
Car insurance and homeowners insurance companies have a habit of slowly increasing their rates over the years. So, if it has been a few years since you changed insurance companies, you should get some new quotes. A different company may offer you a lower rate, or your current insurer may offer to match a lower quote in order to keep your business. Even if you don't want to switch insurance companies, it is worth calling to make sure you're getting all the discounts you are eligible for.
If you complete these financial planning tasks by the time 2021 is over, you should be in great shape as the new year approaches. Financial success is all about making a series of small, smart decisions over the years—and these are a few of them.