As the song goes, “It’s the most wonderful time of the year!” The Holiday season brings a lot of feelings, energy, activities and overall busi-ness. It’s so easy to get caught up in all the hustle and bustle. I wanted this blog to be a step back for you and for you to consider five activities that are sometimes overlooked in spite of their importance.
#1 Taxes
So, the first often overlooked year-end planning activity is Taxes! Taxes are often always overlooked until the next year when the deadlines are fast approaching. However, you should be thinking about tax planning way before year end. It is still not too late to reach out to your CPA to do some year-end tax planning and strategy. With the current transition of administration, there may be even more things for you to consider between this year and next year.
If you are looking for a CPA, now is the time to lock one in. Contrary to people’s tendencies, the March/April time frame is the worst time to start calling around, and some CPAs don’t accept new clients for the current year that late in the game. For business owners, now is a great time to look at your financial situation and see if there are any items you need to purchase in the current year so you can get the tax benefit sooner rather than later.
For me, I consulted with my CPA on the potential of purchasing a new vehicle at the end of the year. We talked through the alternatives and I was able to make an educated decision to buy or wait on the vehicle purchase. I ended up deciding to wait. One thing that my tax accountant reminds me is to, “Don’t let the tax tail wag the dog!”
#2 Estate Planning
The second planning activity I want to mention is Estate Planning. This is not necessarily a year-end planning activity but one I always like to mention. I’ll save the details for another time but look into getting a trust, especially if you have children. Working with a good trust attorney you’ll be surprised at the things the trust can do. If you already have a trust, and haven’t revisited in the last 3 to 5 years, consider reviewing it with your attorney, it’s probably due for an update.
#3 Review Your Balance Sheet
The third activity is review your personal balance sheet. Let’s start with the assets: Do you have a stock portfolio or 401k plan? As some stocks or mutual funds outperform others your portfolios may get out of balance in terms of your risk appetite. Also, as you get older and closer to retirement, your risk tolerance changes so re-balancing is necessary to reduce that risk. If your investments are professionally managed, reach out to your financial advisor for a year-end discussion. This may also include some tax planning too!
#4 Debt Consolidation
The fourth year-end planning activity is, consider debt consolidation. I like to call this Maximizing your working capital. Right now, we are seeing record low interest rates. Consider refinancing your debt either to reduce your interest rate or maximize the use of your built-up equity. Another alternative is recasting your loan. Here’s the link to my blog on lowering monthly payments by recasting your mortgage (https://realestateofhawaii.com/real-estate-blog/recast/). Analyze your current financial situation and new earning power. Maybe you received raises during the year and make more money now. Cash building up in your checking account can be put to better use paying down debt or invested rather than sitting in the bank.
#5 Acts of Gratitude
The fifth year-end planning activity and the one I think is the most important of all of these is, wait for it, to have gratitude. For some, this was a really rough year. No matter how things are going, there are always things that we can be grateful for: the roof over our heads, food on the table, our health, great family and friends. This morning I woke up and before reaching for my cell phone to read emails, which a lot of people are guilty of, I sat in bed and tried to find gratitude. I was really tired so it was kind of challenging. Then I focused on why I was tired and found my answer. I was grateful for having a lot of family activities and work to keep me busy the day before. See, in all the craziness we often forget to be grateful for what we have and it does take effort to find the gratitude but it’s important that we go through that drill regularly.
So those are the 5 year-end planning activities for you to think about. In the words of the rapper, Lil Wayne, “The more time you spend contemplating what you should have done… you lose valuable time planning what you can and will do.”
