Important Financial Actions To Take Before The End Of The Year



By Jeffrey J. Brown, MD, MBA, CFA®, CFP®


This year has been one for the history books. All of us have experienced canceled plans, work stoppages, complicated family decisions, and/or financial challenges. To add to the uncertainty, we don’t know what the future will bring with regard to the pandemic or the stock market. How do you prepare when there is so much unknown? You go back to the basics. Here are 7 financial actions that could make all the difference as we near the end of 2020.


1. Rework Your Budget

Even if your income hasn’t been affected by COVID-19, it’s likely that your spending has. Whenever you experience life changes, it’s wise to take another look at your budget to make sure your spending is in line with your goals and shift things around to manage your priorities. For example, you might be spending less on gas and eating out, but more on groceries and online shopping, not to mention that prices on many basic items have increased. If you have experienced income changes, make sure you factor those in and adjust your spending accordingly. Go into 2021 with a rock-solid budget that helps you feel financially secure.


2. Adjust Your Goals And Set New Ones

Don’t be afraid to set new goals for 2021. Look at your budget and priorities and find ways to work toward your savings goals. Get creative with things you want to accomplish next year. You may not be able to take that international trip you’ve been dreaming about, but you can get your family together for a local vacation or refocus your energy on tackling a home renovation. If you’re planning to retire, relocate, or make any other big financial moves, identify now what changes you can make to smooth the transition.


3. Don’t Skimp On Your Savings

While things seem uncertain, don’t hold back from saving for the future. Consistency and compound interest make all the difference in the growth of your investments. If possible, max out the contributions to your 401(k) or 403(b) by the end of the year to make the most of your retirement savings. For 2020, you can contribute as much as $19,500 (or $26,000 if you are age 50 or older). You might also consider contributing to a Roth IRA. In 2020, you can put up to $6,000 in any type of IRA. If you are over age 50, that amount goes up to $7,000 thanks to the $1,000 catch-up contribution. If you do not qualify for direct Roth IRA contributions, a backdoor Roth conversion may be an attractive option. We also strongly encourage setting up automatic monthly deposits into a taxable investment account to supplement your retirement savings. Finish the year strong by investing in your future!


4. Use Up Your Employee Benefits

While every employer has different rules that apply to the benefits they offer their employees, many benefits expire or reset at the end of the year. You work hard for these perks, so be sure to use them!


Medical And Dental Benefits

At the beginning of 2020, did you have good intentions of taking care of some dental work, blood tests, or other medical procedures lingering on your to-do list? Now’s the time to take advantage of all your healthcare needs before your deductible resets. Dental plans in particular often have a maximum coverage amount. If you haven’t used the full amount and anticipate any treatments, make it a priority to set an appointment before December 31st.


Flexible Spending Account

Like your health insurance benefits, you’ll want to use up as much of your FSA (flexible spending account) dollars as possible by the end of the year. Rules only allow you to carry over $500 to the next plan year. Check the restrictions to see what you can use the money for, and take care of any needs your plan allows.


Sick And Vacation Time

Depending on your employer, your sick or vacation time might expire at the end of the year. Check with your HR department to learn about any expiration dates. If it does expire, fit in a last-minute staycation or take some time off to work on projects you’ve been putting off. If you need to make any trips to the doctor, schedule those appointments now to make use of paid-time-off benefits before you lose them.


5. Revisit Your Plans And Policies

Along with updating your budget, take another look at your estate plan and insurance coverage. If you took the time and energy to create an estate plan, check it periodically to ensure all the documents are up to date and no major details have changed. If you change a beneficiary in one place, such as a life insurance policy, make sure you are consistent with your other documents to avoid confusion.


Your insurance needs may change as the year goes by, so periodically review your coverages and designated beneficiaries to bring them up to date to reflect your current financial situation. For example, if you paid off debt, you may not need as much life insurance coverage since your family’s liabilities have decreased.


6. Give When And Where You Can

The end of the year is a good time to make your charitable contributions. Support local nonprofits or charities that share your values and make the end of the year brighter for someone else. You can even donate appreciated securities, which may help you avoid paying taxes on the gains.


If gifting is one of your long-term financial goals, it’s never too early to start planning for the legacy you want to leave your loved ones without sharing a good portion of it with Uncle Sam. Each year you can give up to $15,000 to as many people as you wish without those gifts counting against your lifetime exemption of $11.58 million.


7. Find An Advocate

If this year has taught us anything, it’s that we all need each other’s support. Before the year is over, seek out a financial professional who can take an objective look at your financial situation and help you take your finances to the next level regardless of what comes your way in the coming months and year. In a time of heightened emotions, dramatic headlines, and a temptation to panic, you need to know you have someone in your court watching out for your money and making sure you are on track to your ideal future.


Our team at Shearwater Capital would love to partner with you on your financial journey. Get started now by scheduling an introductory phone call online or contact us at (314) 434-4750 or contact@shearwatercapital.com.


About Jeff

Jeffrey Brown is principal and chief investment officer at Shearwater Capital, LLC, a fee-only fiduciary financial advisory firm helping physicians and their families attain financial security using a scientific, evidence-based approach. Jeff has been a practicing radiologist for over 30 years and is currently chair of the Department of Radiology at Saint Louis University School of Medicine. He earned his bachelor’s degree from the University of California, Irvine and his medical degree from the University of California, San Diego. He has been named one of St. Louis’s Top Doctors every year since 2011 in St. Louis Magazine. Jeff saw a need for physician-tailored financial services and earned an MBA from Washington University in St. Louis, going on to found Shearwater Capital, LLC with fellow MBA classmate and radiologist, Eric Malden. Jeff is a Chartered Financial Analyst (CFA®) and CERTIFIED FINANCIAL PLANNER® (CFP®) practitioner. Learn more about Jeff by connecting with him on LinkedIn.