Tick tock, tick tock. Time is running out before the ball drops in Times Square and ushers in 2016. That means it’s time to make some key last-minute financial fixes to clear your money plate. Here are six moves you can make before saying good-bye to 2015:
1. Mind your interest rates.
With the Federal Reserve set on gradually increasing a key benchmark rate, higher interest rates are on the 2016 horizon. If you have a home equity line of credit, or HELOC, with an adjustable rate, ask your lender now to fix the interest rate on the amount you have already borrowed. That way, any rate increase would only affect future borrowing.
Similarly, if you have an adjustable-rate mortgage, it’s time to ask a loan officer or mortgage broker about your options for refinancing before the rate adjusts higher.
Pay off your credit cards, which typically have variable interest rates. Otherwise, you’ll soon be paying a higher rate to reflect the Fed’s most recent rate hike, says Neil Waxman, a certified financial planner at Capital Advisors in Shaker Heights, Ohio. If you can't pay down the entire balances, start shopping for a credit card that offers a 0-percent balance transfer for a year or longer.
2. Reassess your investments.
The markets—stocks, bonds, oil and everything in between—had a volatile year and have likely changed the mix of asset classes within investment portfolios. That means you should review and rebalance your portfolios to stay in line with your risk tolerance.
“Periodic rebalancing allows investors to take advantage of market volatility by trimming positions that have recently run up in value and adding to positions that are currently out of favor with investors,” says Benjamin Smith, a wealth manager at Wealthcare Solutions in Bryn Mawr, Pennsylvania. “Over the long-term, this is a winning strategy.”
With that said, don’t dump stocks simply because of volatility; instead, think long-term, says Waxman. For example, don’t ditch foreign stocks in developed and emerging markets because of recent subpar returns because “those asset classes present higher projected returns over the next decade,” he says.
3. Make sure everything is up to date.
Families change from one year to the next. Marriages, births, divorces and deaths all happen and can change the particulars of your finances. Review your life and disability insurance policies to make sure they keep up with a growing family. Update beneficiaries on insurance and retirement accounts and make changes to wills, powers of attorney and health proxies to reflect new family circumstances.
If you renovated your home this year, make sure your homeowner’s policy reflects the increase in your house’s value.
4. Spend down your health care FSA.
Don’t lose tax-free dollars in your flexible spending account because you didn’t spend them before year-end. Stock up on the following FSA eligible items that don’t require a prescription from a doctor: athletic treatments/braces, bandages, first-aid kits, condoms and other OTC contraceptives, and contact lenses and solution. Consider getting a new pair of glasses or another set of dentures. Or, visit a chiropractor or acupuncturist.
If your employer offers a grace period through the first two and a half months of next year, call your primary care doctor, dentist and eye doctor to set up check-ups in January or February for you and your family. Pay for the check-ups with your FSA money.
5. Review automatic bills.
Check your recent credit card statements for any automatic subscriptions and make sure you still want them, says Pamela Sandy, president-elect of The Financial Planning Association. Often, people sign up for a free trial period for a service and forget to cancel it. Review your cable, wireless and cellphone bills, too. Give each provider a call to request a lower rate for the new year, especially if you can show a better deal from a competitor.
6. Have a plan for extra money.
Tis the season of pleasant surprises, whether it’s an unexpected bonus from your boss or a generous holiday check from Aunt Ida. Workers who earn more than $118,500 also will get a bigger paycheck near the end of the year after maxing out Social Security contributions for 2015. In these cases, know where you want to put the extra cash—paying Christmas bills, toward a vacation next year or into savings for an emergency fund. Whatever you do, have a plan, so you don’t blow your windfall.