There's still time in 2015 to take advantage of financial moves that can start you off on the right track in 2016.
As we wrap up 2015 look, back at the resolutions you took at the beginning of this year. If any of them involved your personal ï¬nances, did you follow through with them? If not, consider these ï¬nancial strategies to ring in the new year with a bang instead of a whimper:
Strategy 1: Max Out Your Employee Contribution
If you are an employee of a group or hospital which has established a 401(k) or 403(b) plan, the deadline for you to max out your 2015 employee contribution is Dec. 31. Look back at your paystubs and see how much you’ve contributed in the ï¬rst 11 months of the year and then project your December contribution. If it falls short of the maximum, change your percentage contribution ASAP before your last paycheck of the year.
Strategy 2: Increase Your Cash Reserves
Your credit card bills will almost certainly be higher in January — after all your family and friends think you’re a rich doctor so you can’t just give them Walmart clothes, you know. But those bills are like pimples on an elephant’s back compared to the cash you’ll need for other much bigger obligations looming.
These include federal and state estimated tax payments for 2015 — the last one is due by Jan. 15. Then when the tax season goes into full swing, you may have to cough up more money in April to pay off 2015 taxes. And then you’ll get hit again at the same time for your ï¬rst estimated tax payment of 2016.
On top of that if you’re an independent contractor you can still make 2015 retirement plan contributions in 2016 — depending on your situation these may be due by April as well.
Pump up your bank account now so the ï¬rst few months of 2016 are a breeze.
Strategy 3: Get Your Portfolio Back in Balance
It’s been a roller coaster year for several investment classes and your portfolio might be out of whack. You should be rebalancing your portfolio year round rather than just choosing an arbitrary date. If you haven’t done that, then look at your overall portfolio including all accounts you own and ï¬gure out how far off you are from your desired target allocation. Then make the appropriate trades to get back to that desired allocation. And one more thing — if you have losses in a taxable account, consider selling for a loss before year end to claim the loss on your tax return.
Bonus Strategy: Work More!
Didn’t I tell you to work more in my last article? If you did, then you may have the cash ï¬‚ow to max out your 401(k) contribution this month (Strategy 1), have more liquidity next month (Strategy 2), and use the extra cash to get your portfolio back in balance (Strategy 3).
Do all of that and you’ll be well ahead of your colleagues when the ball drops on New Year’s Eve — both in 2015 and into 2016. Happy New Year!
Setu Mazumdar, MD, CFP® is board certiï¬ed in EM and he is the President of Financial Planner for Doctors. FinancialPlannerForDoctors.com