As the year draws to a close, it's crucial to take charge of your finances. From using up FSA funds to setting financial goals for the new year, these 10 steps can help you make the most of your money and set a strong financial foundation for 2025.

Unlock the Power of Year-End Finances

1. Utilize Remaining FSA Funds

Flexible spending accounts offer a unique opportunity to cover various expenses. You can use your FSA funds for essential items like contact lenses, prescription drugs, and bandages. It's important to spend the remaining funds before December 31 to avoid losing them. By doing so, you can make the most of this tax-advantaged account.

For example, imagine you have $500 left in your FSA. You can use it to purchase the contact lenses you need for the next few months, saving you money in the long run. This simple step can help you optimize your finances and get the most out of your FSA.

2. Maximize Retirement Contributions

Investing in a retirement account is a smart move for the future. Chris Berkel emphasizes the importance of contributing as much as possible to your 401(k) or IRA. By doing so, you can take advantage of the power of compounding and reach your savings goals faster.

Let's say you're eligible to contribute $18,000 to your 401(k) this year. By maxing out your contributions, you're giving your retirement savings a significant boost. Even small increases in your contributions can have a big impact over time.

3. Donate to Charity for Tax Benefits

Donating to charity not only brings a sense of fulfillment but also offers tax advantages. You can write off charitable cash contributions up to 50% of your adjusted gross income, reducing your taxable income and potentially lowering your tax bill.

For instance, if your adjusted gross income is $50,000, you can donate up to $25,000 and receive a tax deduction. This can help you save money while supporting a cause you care about.

4. Review and Adjust Insurance Policies

Insurance plays a vital role in your financial plan, but your coverage needs may change over time. Review your auto insurance, homeowners or renters insurance, and health insurance to ensure they still meet your current needs.

For example, if you got married or had a child in the past year, you may need to increase your life insurance coverage. By comparing different providers, you can find the best deal and ensure you're adequately protected.

5. Rebalance Your Investment Portfolio

Rebalancing your investment portfolio is essential to keep it on track. Emily Luk recommends having three to six months of expenses in an emergency fund and ensuring your asset allocation aligns with your goals.

Suppose you're 30 years old and have a portfolio with 30% in bonds and 70% in stocks. As you age and your risk appetite decreases, you might shift more money into bonds. This helps manage risk and ensures your portfolio remains balanced.

6. Update Beneficiaries

Regularly reviewing your beneficiaries is crucial to ensure your assets are distributed according to your wishes. Life events such as marriage or the independence of your children may require you to update your beneficiary list.

For instance, if your child is now an adult and no longer relies on you financially, you may want to remove them from your life insurance beneficiary list. This simple step can prevent any confusion or disputes in the future.

7. Analyze Interest Rates

The interest rate environment is constantly changing, and it's important to stay informed. Consider how savings accounts, CDs, mortgages, and debts are affected by rate changes.

For example, if you have a high-yield savings account with a low APY, it might be time to switch to a better option. By doing so, you can earn more interest on your savings and grow your money faster.

8. Consider a Roth Conversion

Converting a traditional retirement account to a Roth IRA can provide significant tax advantages. With a Roth IRA, you contribute after-tax money, and withdrawals in retirement are tax-free.

Imagine you have a traditional IRA with $100,000. By converting it to a Roth IRA, you'll pay taxes on the contribution now but enjoy tax-free withdrawals in the future. This can be a smart strategy for reducing your tax liability in retirement.

9. Take Required Minimum Distributions

If you're 73 years or older, it's important to take the minimum required distributions from your retirement accounts. Failing to do so can result in a 25% excise tax.

Use a calculator to determine your required minimum distribution and make sure you withdraw the appropriate amount. This helps you avoid penalties and manage your retirement income effectively.

10. Set Financial Goals for 2025

Carrying positive momentum into the new year is key. Set specific financial goals such as paying off debt, mastering your budget, or fully funding your emergency savings.

For example, if you have $10,000 in credit card debt, create a plan to pay it off within a certain timeframe. By setting clear goals, you can stay focused and make progress towards a more secure financial future.