I fondly refer to the month of September as “Back to School, Back to Reality.” It’s when we wrap up summer and settle into a new routine. And Halloween is not the only spooky event after a summer of spending (because, let’s be honest, summer fun has a way of throwing budgets off track).
Diwali is in 22 days.
Hanukkah is in 46 days.
Christmas is in 73 days.
Kwanzaa is in 74 days.
Reality check: That means a big spending season is right around the corner.
Here are nine important money moves you can make to end 2021 strong. Add these tasks to your fall checklist:
1) Check in on your spending habits by reviewing some recent bank statements. Note any new expenses, as well as ones that might be popping up again soon (hey, office commute). If you see room for improvement in your budget, now is a good time to free up some cash for the rest of the year.
2) Prep your holiday budget: Yes. This early. Because pandemic-related shortages and shipping issues are already predicted to make the 2021 holiday season extra expensive. Estimate how much you spent last year on things like gifts and shipping, decorations, clothing and travel. Divide the total by the number of weeks until you will start spending and save a little from each paycheck in a holiday sinking fund.
3) Round up your rewards. Did you summer swiping help you rack up credit card points or cash back? Redeeming what you can now could help offset some big purchases, like gifts and travel. Speaking of ….
4) Book year-end travel. Delaying this move could cost you. The cheapest days to book holiday travel may have already passed. But booking a Thanksgiving flight before Halloween could save you up to 40%. And you will want to book a Christmas flight before prices go way up in December. Oh, and don’t forget to consider travel insurance!
5) Add student loans back into your budget if you have been taking advantage of the pandemic pause. Heads up: it ends January 31, 2022. Maybe for real, this time.
6) Use your work benefits. If you have unused vacation days or funds in your health flexible savings account (FSA), use them before you lose them!
The limit for health FSAs in 2021 is $2,750. Typically, carryover amounts for health FSAs are limited; however, the Consolidate Appropriations Act temporarily allows you to roll over any unused funds for plan year ending in 2021 (if your company opts in to these changes).
7) Think about your health insurance needs. Open enrollment is the most wonderful (and only) time of the year to sign up or change your health insurance. The exceptions: if you just experienced a qualifying life event such as getting married, losing a job, having a baby or losing health insurance.
If you elect to enroll in a High Deductible Health Plan (HDHP), make sure to take advantage of a Health Savings Account (HSA) where you can contribute pre-tax dollars to save and pay for things like medical expenses and prescriptions.
2021 HSA Contribution Limits:
- Individual: $3,600
- Family: $7,200
- Age 55+ Catch up: $1,000
With an HSA, any money you don’t use in the account rolls over to the next year. The unused funds can be invested similar to your 401k or IRA account and all funds grow tax-free (meaning you won’t get a 1099 on any interest, dividends or capital gains that you have earned).
Are you sick of acronyms yet? I hope not because I have one more!
8) Dependent Care Flexible Spending Account: As part of the American Rescue Plan, the contribution limit for Dependent Care Flexible Spending Account has increased its limits for 2021 – offering a higher tax break!
- For single filers, the limit is $5,250, up from $2,500.
- For married couples filing a joint tax return, the limit is $10,500, up from $5,000.
Remember, these contributions are all pre-tax and not subject to payroll taxes, so you end up paying less in taxes and taking home more of your paycheck.
Not all companies have adopted this change, so be sure to check with your employer or Dependent Care FSA plan sponsor!
9) Up your investments. If there’s room in your paycheck, consider increasing how much you invest in your 401(k). Reminder: the 2021 limit is $19,500, $26,000 for those age 50 plus. When you are retired, you will be happy you did. So will your tax return, since you get to deduct retirement contributions from your 2021 taxable income. Remember, contributions must be made during the calendar year i.e. January - December 2021!
Fall is the perfect time for apple picking and getting your finances in order. Tackling a few money tasks – like freeing up cash in your budget, getting an early start on holiday budgeting and reviewing your benefits – can help you end the year strong!
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.