With the end of the year approaching, you may feel the pressure to get your finances in order – and rightfully so. Financial experts often emphasize that year-end strategies can lead to significant savings and better preparedness for the year ahead.
From maximizing tax advantages to trimming unnecessary expenses, these tips are designed to help you make the most of the last few weeks of the year.
Whether focused on debt reduction, saving for future goals, or setting up a robust financial plan, here are 10 actionable steps to strengthen your financial position before the calendar flips.
1. Max out your retirement contributions
The end of the year is a great time to review your 401(k), IRA, or other retirement accounts.
Contribute as much as you can to take full advantage of tax benefits. The earlier you contribute, the more time your investments have to grow due to compounding. Waiting until the next year means losing valuable growth opportunities.
Check if your employer offers a match — leaving free money on the table is a missed opportunity.
If you’re already enrolled, stay within contribution limits. Retirement accounts have annual contribution limits set by the IRS. If you don’t max out before December 31, you lose that year’s contribution capacity permanently.
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2. Review your year-to-date spending
Take a close look at your spending habits over the past year. You can do this with a simple pen and paper, a free online spreadsheet, or a budgeting app.
Looking back on your spending helps you identify patterns and trends, clearly showing where your money went throughout the year. End-of-year reviews can highlight wasteful or non-essential spending, allowing you to cut back and save more in the future.
Reviewing expenses like charitable donations, medical bills, or education costs can help you ensure you’re claiming all eligible deductions before filing taxes.
The holiday season often leads to increased spending. A review in December can help you be mindful of your financial limits and curb unnecessary purchases during the holidays.
Reflecting on your year helps create a realistic budget for next year: Analyzing your spending gives you the data you need to craft a budget that reflects your actual expenses and aligns with your financial goals.
3. Harvest tax losses
If you’ve had a few investments that didn’t perform well, consider selling them to offset capital gains.
Selling underperforming investments at a loss can offset any capital gains you’ve realized during the year. This strategy helps reduce your taxable income from investments.
If your losses exceed your gains, you can deduct up to $3,000 from your ordinary income (or $1,500 if married filing separately). This directly lowers your taxable income for 2024. Any losses beyond the $3,000 deduction limit can be carried over to future tax years, providing continued tax benefits.
Harvesting losses offers a chance to clean up your portfolio by eliminating poorly performing investments while potentially reinvesting in more promising opportunities.
The deadline for tax-loss harvesting is December 31. Acting before year-end ensures the losses count for the current tax year, enabling you to benefit when filing in 2025. Consult with your tax professional or financial advisor for precise execution.
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4. Use up Flexible Spending Accounts (FSAs)
Many FSAs have a “use-it-or-lose-it” policy. Check your account balance and spend it on eligible medical expenses or childcare costs before the deadline.
FSA funds typically don’t roll over from year to year unless your plan allows a small grace period or a limited carryover amount (up to $610 for some plans in 2024).
Spending the balance ensures you get the full benefit. This may be a good time to purchase eligible prescription medications, over-the-counter supplies, eyeglasses, or dental work you may have been putting off.
Using FSA funds for planned expenses like medical bills or childcare costs frees up cash for other year-end financial priorities or holiday spending.
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5. Make charitable donations
Giving to charities not only supports a good cause but can also provide tax benefits. Your philanthropic donations may allow you to claim a tax deduction.
Find an organization that aligns with your values. Make the donations before the end of the calendar year and keep all records for tax filing purposes.
Because the deadline is December 31, many people make their donations part of the holiday season. It’s an excellent opportunity to reflect on all you have and the good you’d like to share with the rest of the world. Plus, it’s always great when it pays to do good in the world.
Itemize your deductions before tax season rolls around. It may offset some of your tax liabilities.
6. Check your credit report
A year-end review of your credit report can help you spot errors and identify opportunities to improve your credit score. You can access your credit report for free every week on AnnualCreditReport.com, the official site authorized by the federal government.
The end of the year is an important time to check your credit report for any inaccuracies or identity theft. Catching fraudulent activity earlier may help you thwart future damage if thieves attempt to file a fraudulent tax return.
Certain tax deductions, like interest on a mortgage or student loans, might align with accounts in your credit report. Cross-referencing ensures consistency in your financial records.
Understanding your credit score before setting financial goals for the new year is good practice.
7. Pay down high-interest debt
If you’ve accumulated credit card debt or other high-interest loans, focus on paying them down.
Entering the new year with less debt reduces financial stress and gives you a clean slate to focus on saving and investing rather than playing catch-up on payments. Reducing these balances can save you significant money in interest payments.
Aim to pay off your most burdensome creditors to save on interest charges for the rest of the year. For maximum impact, focus on revolving debts, such as credit cards or personal loans, and high interest rates first.
Lowering your debt, especially credit card balances, reduces your credit utilization ratio, a key factor in your credit score. A stronger credit score positions you better for loans or refinancing opportunities.
Eliminating high-interest debt gives you more breathing room in your budget, allowing for greater financial freedom and the ability to allocate money toward other priorities.
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8. Adjust your tax withholding
If you’ve had significant changes in income or deductions, consider adjusting your tax withholding. This ensures you’re not overpaying or underpaying taxes, which can lead to a surprise at tax time.
Adjusting your withholding ensures that you’re not overpaying or underpaying taxes. Underpaying can lead to penalties and interest, while overpaying means you’ve given the government an interest-free loan.
Have you experienced any major life changes this year? If your income or deductions have changed due to a new job, marriage, a child, or other life events, updating your withholding ensures your tax liability reflects your current situation.
Reducing excessive withholding allows you to keep more money in your paycheck now, which can be used to pay down debt, invest, or cover expenses, rather than waiting for a refund after filing taxes.
If you expect changes in 2025 (like different deductions or tax credits), adjusting your withholding now helps you prepare for the next tax year without disruption.
9. Use credit card rewards strategically
Many credit card reward points, miles, or cashback balances have expiration dates. Reviewing and redeeming them before year-end ensures you don’t lose out on benefits you’ve already earned.
This can help to offset holiday spending. The end of the year often brings higher expenses due to holiday shopping or travel. Redeeming rewards for gift cards, discounts, or travel credits can significantly reduce out-of-pocket costs.
The end of the year may also be an opportunity to maximize annual bonuses. Some credit cards offer bonuses based on your spending within the calendar year. Strategically redeeming and spending rewards now can help you hit those thresholds before the year resets.
It’s always great to start the new year fresh. Clearing out your rewards lets you begin the new year with a clean slate to accrue and manage points without leftover balances from the previous year.
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10. Set financial goals for next year
Use this time to establish clear financial goals for the coming year. Whether saving for a house, building an emergency fund, or starting a side hustle, having a plan makes your goals achievable.
The end of the year provides a natural opportunity to evaluate your financial habits and what worked and what didn’t. This reflection helps you create informed and realistic goals for the upcoming year.
Establishing goals before January 1 allows you to hit the ground running. You can align your budget, savings plans, and investments to begin working toward your objectives immediately.
Setting goals at a time when change feels fresh and exciting (the new year) can inspire greater commitment. It helps turn vague aspirations into actionable steps.
Finishing strong for a prosperous 2025
By taking these smart steps now, you can finish the year on a strong financial note and set yourself up for success in the months ahead. Don’t let the hustle of the holidays derail your progress.
Your financial position at year-end—spending habits, debts, and savings—provides a comprehensive snapshot, allowing for more accurate goal-setting.
The new year often brings competing demands, like tax preparation, work obligations, and family plans. Establishing goals in advance prevents financial objectives from being overlooked.
With a little focus and planning, you’ll be ready to welcome the new year with confidence and financial stability.
