Andy Nathan 2 months, 22 days ago

The holidays are a magical time of year. This is when you can spend time with family and friends, be thankful for all the blessings you have, and just relax. Well, almost relax.

Not to say that we have homework for you, but, if you want to start 2015 off on the best financial footing possible, we want to give you a few ideas to improve your financial position before the calendar turns.

Below are seven strategies you can employ (even in between sips of eggnog) to improve your business and personal finances before the clock strikes midnight on December 31st.

1. Find Last Minute Deductions

The only thing better than making a lot of money is saving it from the taxman. While many deductions are available, one of the best options for those interested in investing in the future is putting money away for retirement.

Currently, the IRS allows a $5,500 tax-free exemption on IRA deposits for those 50 and younger ($6,500 for people 50 and up). If you are self-employed and have additional liabilities, talk to your attorney or CPA about setting up a 401K for your business. Currently, the government allows a $17,500 tax-free investment for 401(k)s ($24,000 if you’re 50 or older).

2. Tax loss harvesting

This next strategy is great for those with capital gains, and does not require you to own a farm. Instead, tax loss harvesting allows investors to offset capital gains and losses.

Lets take a quick look at how to use tax loss harvesting without violating IRS wash sale rules. and sticking to the maximum of $3,000 taxable losses per year.

First, you must own all investments at least 30 days prior to selling it to qualify for tax loss harvesting, so you do no not violate the IRS wash sale rules. Then we must not purchase that stock again within the next 30 days either.

Secondly, the maximum tax loss that you can use is $3,000 per year. The word “maximum” is key here.

In this example, we have two stocks. One gained $10,000 in 2014. The other had a loss of $4,000. Assuming you held both stocks for more than a year prior to the purchase, and you were in the 25% tax bracket, your capital gains tax would be 15% on the $10,000 gain (or $1,500).

Next, you will want to determine how to reduce that tax liability by calculating how much of the loss can offset the gain. In this case, we are limited to the maximum loss of $3,000. Fear not! We can carry forward the remaining $1,000 tax loss to next year.

Since you are in the 25% tax bracket, you would get a reduction of $3,000 x 25% = $750.

This cuts your $1500 tax bill in half from your effective use of tax loss harvesting. Tax loss harvesting is a great way to reduce your capital gains but can be confusing to navigate on your own, so definitely consult a CPA if this sounds like it could benefit your financial situation.

3. Review your portfolio

At a minimum, you need to review your portfolio annually. Preferably, you should do this every 4-6 months. When reviewing your portfolio, NASDAQ  stock exchange recommends you look at three critical factors in your portfolio’s success: performance, fees, and rebalance asset allocation.

Performance : The first thing you will want to do when you review your portfolio is to determine how your portfolio is doing. Make sure your portfolio is performing well based on your own personal goals and then against industry benchmarks.

If a fund or stock loses more than 10% of its value in the last quarter then you need to consider dumping it. Conversely, maybe it is time to purchase more of that stock that doubled this year. You will only have the answer when you study how your portfolio performed over the past quarter, year, and since you bought the stock.

Fees . Performance is great, but should not be your sole factor in determining the strength of your portfolio. Investigate the fees associated with any mutual funds you own. While most funds have legitimate fees to research and manage your money, you need to make sure that your fund treats its clients fairly.

Ask for the funds 12-B, management, and other fees. These required documents are disclosed in financial statements to the government.

Rebalance Asset Allocation . Finally, you want to make sure that your portfolio measures up with your risk tolerances and goals. If you want a balance of 50% stocks and 50% bonds, then you might need to sell the winning or losing stocks to accomplish these goals.

Rebalancing your portfolio allows you to follow the plan you laid when you first started investing. You might not always have a chance to keep your goals in mind on a day-to-day basis, but rebalancing reminds you of your priorities.

4. Get your taxes in order

Few things are as relaxing as having your finances in order before the IRS is ready. To do this, you will want to have all of your income and expenses documented.

Trippeo can help small business owners accomplish this with its paperless expense tracking tools. From uploading digital copies of your receipts to snapping photos of new receipts on the go, with expense automation tools you now have the ability to relax while getting your taxes in order before the IRS allows returns in February.

5. Create an operations plan for 2015

Operations plans can be challenging when you put together all of the different components like inventory, office space, employees, and other similar expenses.

That is why good operating plans are a blessing. Take Sean Bandawat and Eric Stanton’s award-winning operations plan  as an example.

Their plan went through the details of the business in an attempt to revamp the company to go from red to black on the profit and loss sheets. A good operations plan helps with all of the details of your business. It might not be glamorous, but it can enhance your company’s financial strength significantly.

6. Assess your business financials

After you have gone through your income and expenses for the year, you might want to take a closer look at those expenses to determine which ones put the biggest dent in your business financials. Here are a few ways to reduce that liability.

Business Insurance Certain industries require expensive business insurance policies. Specifically, attorneys, health professionals, and highly regulated industries need to look at the best business insurance for their needs.

Make sure that the level of coverage you have it still a good fit before you go into the new year.

Negotiate with Vendors Just because a vendor gives you a price that does not mean you need to accept it. Negotiate with vendors to get the best deal possible for your company. This can be through direct deductions in price, or extended terms to allow you to collect money from clients, instead of using financing to purchase products.

Be creative in negotiating with your vendors, so everyone walks away happy. Look at the deal structure with your vendor, and determine a course of action that could benefit everyone.

Find Cheaper Digs It is always great to have the nice, fancy office that just oozes success. However, if that success comes at the price of profits for your company it is not worth it.

Any property you rent should provide value to your business. This means it has to be profitable to own or rent the property, otherwise you need to consider downsizing your monthly real estate payments.

If your business can use tele-commuting workers, independent contractors, and paperless offices consider downsizing your office space. It may not always be possible for businesses, but many firms will find that reducing this expense can literally be a lifesaver.

7. Donate to Charity

Tis the season for goodwill! The final thing you might want to do is to donate to charity. First, you can deduct charitable contributions from your taxes; and second, it just feels good to do so.

Use a site like CharityNavigator.org to find quality charities that you are passionate about supporting. Then consult with your CPA to determine how much of a gift you can afford giving to worthwhile charities this year.

Note: Using a site like Charity Navigator will help you weed out charities that are not 503(c) approved organizations. If you give to a charity of your choice on your own, you will need to research the validity of the organization.

Another Sip of Eggnog

Now that we have your finances in order for 2015 go ahead and take a big sip of eggnog. Just remember that the more you can prepare in the last few days of this year, the better your finances will fare in the upcoming year.