This was the year that was unimaginable. The horror flick that unfolded was daily life à la the pandemic. And as the end of the year approaches, there is a sense of having survived, yet knowing there is more to this story. Exhale and make the most of the days between now and Dec. 31 to get ready for 2021.
Some lost jobs or had their income significantly reduced and savings decimated. There has been an upside for those fortunate to be working from home, who pocketed money once spent on the LIRR, gas, and lunches out with co-workers. Whatever your circumstances, there are smart steps to take before year end that can put you in a stronger financial position in the new year.
Assess where you are
"First, take a step back and focus on only your situation. When you look at other people, it could make you feel like you’re so far behind where you need to be, that you might get totally discouraged, says Mitchell Goldberg, president of ClientFirst Strategy in Melville.
What’s the impact of the pandemic? Have you racked up debt, or managed to save? "Categorize your financial weak spots and make an individual goal for each one of them. Prioritize the order in which you’ll tackle each one. Then do your best to guesstimate how long each one will take," says Goldberg.
If your debt has risen, plan to chip away at it as soon as possible. "Use your holiday bonus or year-end dividends to reduce and/or eliminate debt. Why? Interest rates will not be low forever," says Andrew Schwartz, a senior vice president with Madison Planning Group in Hauppauge.
Create a new budget
Once you know where you stand, you will have clarity on where you can make changes in 2021. Review all expenses as much has probably changed since March. "Determine which are fixed and which are variable to ensure you are saving and spending with a purpose," says Brad Calhoun, president and CEO of Teachers Federal Credit Union in Hauppauge.
He says to take a look at the rates you are paying on your auto loan or mortgage. "A refinance could help you save monthly and over the term of the loan. Rates are at an all-time low due to the current economy. Now is a great time to consider refinancing."
The pandemic has presented many opportunities to cut monthly bills. "Essentially every expense become negotiable. This is spectacular mindset to have while trying to achieve your saving goals. Whether it’s cellphone plans, utilities, internet providers, cable and TV expenses, they are negotiable. All that’s required is that you call your service providers and negotiate better terms on your bills and should net you a sizable amount of monthly savings," says Dino Selita, president of The Debt Relief Company in Manhattan.
For your budget you can DIY with free online tools like Mint or consult your financial adviser, if you want guidance.
Required minimum distributions from IRAs have been waived for 2020. "For those individuals who still take monthly distributions to live off, perhaps they can skip or reduce the withdrawal at least for one month which will result in a lower tax burden for the year," says Christopher Congema, a certified financial planner with Landmark Wealth Management in Melville.
If you aren’t on pace to max out your annual contribution into your retirement account, think about making an extra contribution toward the end of the year, he says.
Given all that is going on, needs will be great. If you can, make any charitable donations by year-end to help and get a tax deduction.