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6 Smart Ways to Give Your Finances a Boost Right Now

Jan 03, 2017

Procrastinators, listen up.

By checking certain financial tasks off your to-do list now instead of leaving them for the last minute, you won’t just feel better—you’ll also bank some serious coin. Contribute to an IRA in January instead of next April, for example, and you could be sitting on thousands of extra dollars come retirement. “The impact can be significant over time,” says Maria Bruno, CFP, a senior investment strategist at Vanguard.

Here are six smart first-minute moves to get 2017 off to a profitable start.

Fund Your Accounts

Get a 15-month head start

Nearly one-quarter of all IRA contributions for 2017 won’t be made until next April, just before the tax-filing deadline. But you can boost savings by 10% or more if you contribute as soon as the law allows (see the chart below). To take full advantage of the extra months of growth, make sure your money is invested from the get-go in an age-appropriate mix of stocks and bonds or a target-date fund. Vanguard studied how people invest their IRA contributions and found that four months out, roughly two-thirds was still parked in low-earning money-market funds.

Note: Assumes an annual contribution of $5,500 and a real rate of return of 4%. Source: Vanguard

Maximize tax benefits

Front-loading your 401(k) is another potentially smart move if you plan to leave your job before the end of 2017 and won’t have access to a tax-advantaged savings plan. To speed up your contributions, simply increase your payroll deductions; they will stop automatically when you hit the legal limit ($18,000 in 2017, or $24,000 for those 50 and older). Note, though, that this may cause you to miss out on matching contributions, since some employers spread out their matches over the calendar year. Check whether your company has a “true up” provision that would enable you to get the full amount you’re entitled to.

Save on medical expenses

Some high-deductible health plans come with a health savings account, which allows you to contribute pretax money and use it to pay for medical expenses. Front-loading your HSA makes sense if you anticipate big medical bills early in the year, since you would otherwise have to pay out of pocket until you have sufficient funds in the account to reimburse yourself. If you receive a January bonus, your HSA is a good place to put it, says Michael Berry, CFP, head of Voya’s advanced planning team. By doing so, he says, you will have more time to realize gains if you invest the money, and any unused funds will carry over to the next year.

Pay Uncle Sam

Safeguard your refund

More than seven in 10 Americans received tax refunds in 2016, averaging $2,777, according to IRS data. The earlier you file, of course, the sooner you can get your money. Plus, by filing early you limit the amount of time a cyber-thief has to submit a return in your name and make off with your refund. In 2016 the IRS’s ID theft filters found fraudulent returns worth $194 million—and those were just the ones the agency was able to catch.

Another potential benefit: If you experienced a financial setback in 2016 and are applying for college assistance through the Free Application for Federal Student Aid, or FAFSA, your return may help you negotiate a better package.

Fast-Track Your Goals

Get more from charitable donations

Just over 17% of charitable giving in 2015 took place in December, compared with 6% in January, according to Blackbaud, which helps nonprofits manage donor relationships. By giving at the start of the year, you can help your charity be more effective. “If we got 25% of [our individual support] in January instead of in the last quarter, and some of that was earning interest, that’s not an inconsequential number. That’s putting food in the bellies of our homeless shelter guests,” says Dan McGuire, CEO of Homeless Solutions in Morristown, N.J.

Take stock of where you stand

Early in the year is a good time to check on your credit rating. (Many credit card issuers, including American Express, Capital One, and Discover, offer cardholders free FICO scores.) If you’re working to improve your credit, regular review could provide the motivation you need. Another smart strategy to implement in the new year: Automate payments for as many credit cards and other bills as possible, since late payments quickly hurt your score.

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