11 Moves to Consider by Year-End

Take a Financial Snapshot and identify strengths and weaknesses

Review your current financial situation and compare it to the previous year. Did you stay within budget? Did you meet your short-term goals? Did you pay off the debts you hoped to? Have you experienced a major life event in the past year? Does anything need to be updated as a result? Review your cash flow projection as well as your net worth (assets minus liabilities). Are you heading in the right direction or do some changes need to be made?

Assess your debt and create a debt paydown strategy if you don’t already have one

Your net worth and budget are a great place to start. Review balances and interest rates on credit cards, student loans, auto loans, home equity loans, mortgage loans and others. Variable rates or rates exceeding 5% should be considered candidates for refinancing or consolidating into a program with a lower fixed rate. If you have the means, consider paying them off within the year. There are several debt paydown strategies from which to choose; the debt snowball method, debt avalanche method, and debt consolidation method are but a few.

Max out contributions to a 401(k), 403(b) or IRA (or if you can’t max out, at least increase your contributions)

Does your company offer a matching 401(k) contribution as part of your employee benefits? If so, this is free money, so take advantage of it and contribute the maximum amount to your 401(k). Check with your HR department to determine what that amount is, as it differs per company. If you can’t contribute enough to get the match, contribute what you can and increase contributions incrementally each year. Remember, contributions to traditional IRAs are tax deductible. You have until Dec. 31 for 401(k) contributions. Tax deductible contributions to a traditional 401(k) are capped at $19,500 for 2020. Workers age 50 and older can make an additional $6,500 in catch-up contributions. All of these will decrease your taxable income.

Contribute to your Emergency Fund (if you don’t have one, start one)

Everyone should have an emergency fund. Unexpected expenses are inevitable, so if you have an emergency fund you won’t need to borrow money or put it on your credit card and go deeper in debt. The size of your emergency fund will depend on your specific situation (lifestyle, monthly expenses, income, etc.) but a good rule of thumb to use is three to six months’ worth of expenses.

Consider refinancing (if you have a mortgage)

Refinancing can lower your monthly mortgage payments, as well as cut the life of the loan. Rates are very low resulting from the Coronavirus pandemic. If your current rate is more than half a point higher than the rate listed today for refinances, you may want to review your options. It is worth noting that while we are blessed with these record low interest rates, the Federal Housing Finance Agency (FHFA) recently put into effect (December 1, 2020) the “adverse market” fee, which is now being applied to any refinances that involve Freddie Mae or Freddie Mac. All these mortgages will be subject to a fee equivalent to 0.5% of the loan balance.

Making the decision to refinance isn’t just about locking in a lower rate. You must also consider how long you intend to stay in the home. Refinancing requires an upfront cost that will take time to break even on. You can run the numbers yourself using online calculators.

Review your health insurance options for open enrollment

This is the time to review coverage and benefits. Are you paying for coverage you aren’t using? Have your deductibles risen? If you’re on a high-deductible health plan with a health savings account, does that still make sense for you? Are you utilizing a health care or dependent-care flexible spending account? Pre-tax contributions can save you a lot of money depending on your tax rate. Check your current balance and find out whether your plan allows rollovers for any unused money. If not, that is money lost.

Review your 401(k), 403(b) and other investments accounts (allocation, rebalancing, etc.)

Asset allocation is the process of dividing the money in your portfolio among stocks, bonds, and cash. Your asset allocation should be matched with your tolerance for risk, as well as your time horizon (when you’ll need the money you are investing). These two factors, as well as your goals may change over time. You may also notice movement of your allocation outside of where you originally set it (known as portfolio drift). This may happen as stock values rise suddenly, or bond interest rates fall. These are great reasons to ensure you are monitoring your allocation and rebalancing your portfolio to bring it back in line with your desired allocation.

Revisit your beneficiary designations on all accounts and review/update your will

As time marches on, new experiences unfold, relationships change, and life events occur. It is crucial you check your beneficiary designations on all your accounts, as well as your will at least once a year to ensure those individuals you have selected still align with your wishes, and that your documents are up to date.

Review tax-loss harvesting opportunities

Tax-loss harvesting is selling an investment that has lost value in your portfolio to realize losses for tax purposes and offset capital gains. This move can potentially even reduce ordinary income by up to $3,000 in the current year. Any remaining losses can be used as a deduction in future years. Be careful not to violate the wash-sale rule, which would disallow the deduction. This rule states you cannot purchase the same or a substantially similar stock within 30 days before or after the sale. Consult with your financial advisor and tax professional prior to making any moves.

Consider charitable giving

Donations are tax deductible. The Tax Cut and Jobs Act nearly doubled the standard deduction for taxpayers to $24,000 for married couples and $12,000 for individuals, making the pool for those who can itemize much smaller. However, the CARES Act allows non-itemizers to take a $300 deduction (per person) in addition to their standard deduction for their charitable contributions. Another option for some is to bunch two years of contributions into a single year, which would allow someone to claim an itemized deduction every other year. Setting up a donor advised fund (DAF) is yet another strategy for those in the financial position to do so. It allows people to deposit a large amount into a fund, deduct that amount from their taxes and then make charitable gifts over time.

Review your withholding

Ensuring current withholding is accurate can make all the difference from receiving a refund to owing a large, unexpected tax bill in April. Job losses, raises, bonuses, positions, additional work all change over time. These changes have a direct impact on how much you owe in taxes. Simply meeting with your tax professional or going online to the IRS website to use their free tax withholding estimator, can arm you with the knowledge you need to make the changes necessary to avoid an unwanted tax surprise later.

I think it is safe to say that most of us are open arms for 2021. This year has been a lesson in adversity to say the least. Do yourself a favor and close out 2020 on a positive note by acting on your year-end financial checklist.


The Balance. (March 2020). 7 Things to Put on Your Year-End Financial Checklist. Retrieved from

U.S. News Money. (November 2020). 10 Year-End Tax Tips for 2020. Retrieved from

USA Today. (October 2020). 5 Financial Moves You Need to Make Before the End of 2020. Retrieved from

Forbes. (November 2020). Year-End Financial Checklist: 4 Money Moves You Should Prioritize Now. Retrieved from

Kiplinger. (August 2020). 3 Reasons Why 2020 May Be the Greatest Giving Year Ever. Retrieved from

Main Street Advisors, LLC. December 2020. Main Street Advisors, Inc. is a Registered Investment Advisor. The articles and opinions expressed in this material were gathered from a variety of sources, but are reviewed by Main Street Advisors, LLC, prior to its dissemination. All sources are believed to be reliable but do not constitute specific investment advice. The views expressed are those of the firm as of December 2020 and are subject to change. These opinions are not intended to be a forecast of future events, a guarantee of results, or investment advice. Any advice given is general in nature and investors must consider their own individual situation. Always contact your financial/investment professional before making any financial decisions. Main Street Advisors, LLC is not responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.

Our Affiliations

We are proud to be affiliated with the following organizations.