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Year-end personal financial tips

Following annual financial traditions can have a positive impact on your bottom line.

Man making a financial transaction on a tablet

Forming annual financial traditions like this year-end checklist can have a big positive impact. Before the holiday rush, make sure to check off these personal finance tasks:

Contribute extra money to your 401(k)

Adding additional pre-tax money to your retirement savings may help lower your annual taxable income. The maximum amount individuals under 50 can contribute in 2020 is $19,500, or $26,000 if you are 50 or older. Since you can't add money to the account yourself, talk to your employer's payroll department to increase your deferral amount. Don't forget to change it back for your first paycheck next year.

Review spending habits

Track your expenses throughout the year and use them to help you build a financial plan for the following year. You may need to adjust categories that were consistently over-budget, and you may want to re-evaluate any unused or seldom-used subscription services — such as cable packages, magazine subscriptions and gym memberships. Canceling could save you money.

After reviewing your expenses, it’s also a prime time to create a budget. Since you’ve done the ground work to see where your money goes, having a budget can be a very important piece in achieving your financial goals.

Pay down debts

Resist the temptation to use your year-end bonus to splurge for the holidays. If you have credit cards or loans to pay off, use the extra money for bigger, one-time payments, especially on high-interest accounts. Not only will the amount owed decrease, but the total interest will decrease, too, making it easier to pay off the debt faster. The sooner you get out of debt the sooner you can start investing in your financial future.

Spend healthcare dollars

If your insurance plan includes a flexible spending account, you may have some money left over as the year comes to a close. If you have more than $500, be aware of the use-it-or-lose-it rule. Make the most of your benefits by completing all preventative exams and taking care of other medical needs before year's end. Most appointments are difficult to schedule on short notice, so plan ahead.

Neither State Farm nor its agents provide tax or legal advice.

The information in this article was obtained from various sources not associated with State Farm® (including State Farm Mutual Automobile Insurance Company and its subsidiaries and affiliates). While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. State Farm is not responsible for, and does not endorse or approve, either implicitly or explicitly, the content of any third party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. State Farm makes no guarantees of results from use of this information.

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