This was originally published on Monday, December 29, 2014, in the Pacific Daily News. Click here to subscribe to the PDN.
Most of us are in a mad rush to wrap up loose ends before 2015. Hopefully you have had some time to review your finances. If you need to make some changes, it’s not too late. Some of the changes you make could affect your finances for next year.
Taxes — It may only be December, but it’s never too late to start thinking about taxes, after all, your W-2 should be out by mid-January.
• To defer or not to defer? Deferring your money is a legal way that lets you pay taxes tomorrow on what you earned today. Basically, it lets you hold on to the money you make a little bit longer. By doing so, you can invest, pay off debt, improve your home, build your emergency fund and so on. It works for you right away. You can place your money in certain types of retirement accounts or investments or into real estate. You should consult a tax accountant to help you defer your taxes.
• How much are you putting into your retirement fund? For most, retirement plans taxes are taken out when you make withdrawals. By placing more into your retirement plan, you could defer the tax on that money until a time when your tax rate is lower. A bonus is that you will have more once it’s time to use your fund.
• Do you have assets in your portfolio that lost money this year? If so, they can be used to offset any capital gains. Contact your financial adviser if you have more losses than gains.
• Do you itemize your taxes? If you do, start getting them in order; don’t wait till April to collect your documents. You will have enough time to calculate your taxes using the standard and itemized deductions. Compare which will save you the most.
• Do you give to charity? ‘Tis the season to give and giving to charities could save you some money come tax time. Your donation does not have to be monetary. If you donated toys, clothing, furniture and other household goods to a charity, you can receive a tax receipt. At tax time, you can use the donation to reduce your tax bill.
• Do you get a large tax return? If so, you may be over withholding for your taxes. The government borrows your money interest-free and then returns it to you at the end of the tax year. If you are underpaying, then you may have a larger tax liability when you file. Go to your employer and adjust your withholdings to balance out an over or underpaid tax bill.
Taking time to review your finances gives you insight on how to improve your finances. It may reveal that you may need some modifications to get in line with your goals. It may show that you are right on track. Either way, it should give you some comfort to know you are in control of your finances.
Thank you for reading Money Matters. I get a great sense of happiness knowing that I can help clarify some financial issues and give you some tips to getting closer to your goals. I wish everyone a very happy and prosperous New Year.
Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at email@example.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.