Nine Important Financial Transactions to Make Before the End of the Year

Total consumer debt hit a record high of $17,7 trillion in the second quarter of 2024, according to consulting firm Deloitte, while Americans have very low savings rates. The coming year will test the financial strength of these consumers, warns Yahoo! Finance.

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That's why now is the time to check the health of your finances and take proactive steps to start the new year strong.

Doing these things before the end of the year will help you set yourself up for financial success in 2025.

1. Conduct a budget audit

Budgeting is an important factor in financial stability. But your financial situation and priorities may have changed since the beginning of 2024.

Compare your monthly expenses with the amount you expected to spend. Did you spend more, less, or about the same?

If you spent more than you expected, you may need to develop a plan to cut expenses and/or increase income in 2025. Alternatively, if you spent less than you expected, you may need to increase your savings and investment contributions.

On the subject: How to budget wisely: the best apps for monitoring finances

2. Strengthen your emergency fund

Maintaining an emergency fund is one of the most important steps you can take to protect the health of your finances.

Why? Without a sufficient emergency fund, you may have to turn to credit cards or other forms of high-interest debt if you lose your job, face a medical emergency, or have a major unplanned expense.

To avoid this, experts generally recommend having enough liquid funds to cover at least 3-6 months of living expenses. But if you're self-employed or have unpredictable income, you may need more.

So take a look at your current savings and decide if you need to work on building a bigger cushion. If so, figure out how much you can afford to put aside each month and start putting it into a high-yield savings account that you can easily access when needed.

3. Use FSA money

A Flexible Spending Account (FSA) allows you to save for health care. Money contributed to an FSA is tax-deductible and can be used to cover health care expenses (insurance deductibles, co-pays, and some medications). The employer deducts the amount of money from the employee's paycheck and places it in a special account, where it can be used for approved health care needs.

FSA contributions are limited to $3300 per person per year. If you're married, your spouse can contribute the same amount through their employer's plan.

While FSAs can provide tax savings on health care expenses, you must use the money in the account within a year. If you don't, you could lose the money (though some employers offer grace periods or rollovers).

If you currently have money sitting in your FSA, consider using the remaining funds before the end of the year. Check with your employer to see what expenses are covered by your plan.

4. Check your subscriptions and cancel the ones you don’t use.

According to C&R Research, the average consumer spends about $219 per month on subscriptions. However, many people actually use subscriptions that cost as little as $86 per month. Subscriptions you pay for but don’t use could be costing you $2000 per year without even realizing it.

Do yourself a favor and review your bank and credit card statements to identify subscriptions you rarely use (or even forgot you had) and cancel them.

5. Make an appointment with your doctor before your deductible hits zero.

Your health insurance plan deductible is the amount you must pay out of pocket before your insurance company starts paying. These deductibles typically reset to zero on January 1.

If you've already reached your deductible for the year, take advantage of the reduced health care costs and book all remaining doctor appointments before the end of the current year. If you wait until next year, you'll have to reach your deductible again before your coverage kicks in.

6. Make the most of tax-advantaged accounts

Accounts that offer tax benefits, such as 401(k), individual retirement accounts (IRAs), and health savings accounts (HSAs), are effective ways to save and invest. Contributions to these accounts reduce your taxable income, helping you get a bigger refund (or at least a smaller tax bill) when you file your return.

You have until April 15, 2025, to contribute the maximum amount for tax year 2024, so if possible, try to make the most of your contributions before the deadline.

7. Explore taxable investment accounts

While they're often not as important as tax-advantaged accounts, taxable brokerage accounts do have benefits. One of the most important is the ability to withdraw funds penalty-free at any time.

Whether you invest using taxable accounts through an online brokerage or otherwise, there are some basic tasks you should perform at least once a year. Perhaps the most important of these is rebalancing, which involves selling investments above your target allocation and buying investments below your target allocation. You can also perform tax-loss harvesting by selling underperforming investments to offset capital gains.

8. Pay off high-interest debts

High-interest debt will put a significant burden on your finances, so reducing or eliminating it will help you start 2025 in a better financial position.

Fortunately, reducing debt isn’t all or nothing. For example, if you’re currently making the minimum payment on your credit card bill, consider paying an extra $50 each month. This will help you reduce your debt faster while significantly reducing the amount of interest you pay in the long run.

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9. Consider refinancing

If you're currently making monthly payments on a large loan, like a car loan or mortgage, compare your interest rate to today's rates. The Federal Reserve recently lowered the federal funds rate. That means interest rates on loans and credit cards are going down, too. Refinancing can save you a lot of money if rates have dropped since you bought it.

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