Your Year-End Personal Finance Checklist

Your Year-End Personal Finance Checklist

The holidays are upon us, but you still have a couple of weeks to get your financial act together in 2007. Even if you've procrastinated all year (again!), you can still finish the year on a high note. As you check off each item in this list, your sense of accomplishment will grow and you'll gain confidence in your own ability to make smart financial decisions.

1. Supercharge Your Portfolio

Rebalance: With all the market volatility this year, your target allocations may be out of whack. Take a look at your Investment Policy Statement and see if you need to make any changes. You do have an Investment Policy Statement, don't you? (For more information, see How to Analyze Your Portfolio.)

• Net gains and losses: So now that you're on a roll, let's take a closer look at what you can do to capitalize on your success. For example, if you've got paper losses (unrealized losses), you may want to sell some of your losing stocks or funds to offset the tax effects from investments with big gains. Check Schedule D of your 2006 tax return to see if you have any losses from prior years that can be used to net out gains.

• Check year-end fund distributions: If you plan to buy and/or sell mutual funds in the fourth quarter, pay attention to year-end capital gains distributions. Most people try to avoid these payouts because they can mess up your careful tax planning. If that's how you feel, don't buy a fund until after it makes its year-end payout. Conversely, if you were planning to sell a fund, consider doing so just before it makes its distribution. You can generally find out when a fund expects to make its distributions by going to the fund's Web site.

2. Shore Up Your Retirement Savings
None of us is getting any younger. And I doubt you want to work indefinitely. So, take the initiative to sock away what you can now.

• Contribute to your company retirement plan: If you have a 401(k) plan, a 403(b) plan, or a 457 plan at work, you can contribute $15,500 in 2007 (some of you may be limited in your contributions by plan "top-heavy" rules).
• Look at your contributions for the year to date to be sure you maximize your savings: Sometimes you think you're taking enough out of each paycheck to contribute the most you can to your company retirement plan, but for whatever reason you're falling short. Look online or at your last statement to make sure you're on track to contribute the most you can. If you see a problem, try to adjust your payroll deductions before year-end.
• Make catch-up contributions: If you are age 50 or older, you can put away an additional $5,000 in your retirement plan for a total of $20,500 in 2007.
• Make IRA contributions: You can contribute up to $4,000 to an IRA in 2007 ($5,000 if you're older than age 50). Anyone, regardless of income level, can make a nondeductible traditional IRA contribution, and now there's even more reason to do so. The Tax Increase Prevention and Reconciliation Act of 2005 allows anyone, regardless of income level, to convert a traditional IRA to a Roth IRA in 2010 and beyond. The two biggest advantages to a Roth IRA are that you don't have to ever pay tax on distributions once you've held the account for five years and are older than age 59 1/2, and you'll never have to take minimum distributions. __ If you're self-employed, make sure you have 401(k) or profit-sharing plans in place by year-end.

3. Set a Holiday Budget

Most of us tend to overspend at the holidays. This year, before you head to the mall, why not spend some time thinking about how much you can really afford to give? The holidays are meant to be special, but sometimes we think that has to have a price tag. After working with lots of wealthy people for many years, I can tell you money won't buy happiness.

So, get creative about how you show your appreciation to loved ones. Make memories that can last much longer than a typical present. That takes some planning, so carve out some time to do just that. (If you've already overspent this year, plan to exercise more restraint next holiday season.)

• Make a list of whom you want to give to and set a range of how much you plan to spend. __ Add to that list holiday decorations, wrapping paper, travel expenses, postage on holiday cards, and so forth.
• Create lasting memories by planning special times with family and friends.

4. Get Estate Documents in Place
Here's another area where people tend to procrastinate. After all, who really wants to think about death? The hardest part always seems to be whom you will name to be guardians for your kids or trustees for your assets.

Just do it.

• Pick the best qualified person you can think of and "Git-R-Done" (as Larry the Cable Guy says). You can always amend your documents later if you find someone more suitable for the role of executor, guardian, or trustee or someone else to whom you want to leave the family heirlooms.
• If you have estate documents, review them to make sure you're still happy with your current plan.

5. Earmark Money for the Kids' Education
Most of you are probably responsible parents. That's why it feels so good to bank some money for the kids' education. Whether you choose a 529 Savings Plan, a Coverdell Education Savings Account, a Uniform Gift/Transfer to Minors account, or something else, carve out some money from your next few paychecks or year-end bonus to invest in your child's future.

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