Money + The Holidays Part III: Wrapping Up Your Finances at EOY

About the Episode

Year-end financial planning is a good way to get your financial house in order for the coming year. And with all the changes 2020 brought to our typical “normal,” there are some critical differences we all should be aware of. On this episode of Making it Count, we wrap up our Money + The Holidays mini series with a discussion on why it is so important to evaluate your finances this time of year and what should be part of that evaluation. Our hosts, Cristina and Will, are joined again by Heidi Pauley from Addition Financial on this last episode of 2020!


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Will asks Question 1: “Let's jump right into our questions today. I want to start with a big picture question. Why is it important to evaluate your finances at the end of the year?”

Heidi responds: “It's a great time for reflection and evaluation. It’s essentially a year in review. You want to take a look at what you can do financially differently to improve for next year. Look at your homeowners, renters, life, auto, and health insurance because these do not have to stay in place every year. Always look for ways to save money. Re-evaluate and get different quotes.”

Will also responds: “Another thing to add to Heidi's statement is take a look at where you're employed. Take a look at the benefits. We’re coming up in the open enrollment periods and it's a great time to re-evaluate things. I think sometimes we forget what benefits were enrolled in or maybe we're missing out on certain benefits.”

Learn more: Try Our Year-End Financial Planning Checklist



Cristina asks Question 2: “Will, you bring up a great point. Flexible spending accounts are really big this time of year because a lot of them don't roll over to the next year. So people are frantically trying to use all the money they have in there. These FSAs are really beneficial, but how can someone maximize these savings and minimize the problems?”

Heidi responds: “It's really important to look at how much money you have in your flex spending account at the end of the year because these don't carry over typically. This is where you should decide if you need to have as much money deducted out of your paycheck or if you need to increase it.”

“The really great thing about the FSA is how many people essentially put away that secondary saving account for medical expenses. The money comes right out of your paycheck, you don't see it, and when you need something, you have the funds. It's like having emergency savings at your disposal. It really helps you to be prepared for the what-if situations.”

Will also responds: “Even if it's just standard copays that you’re paying for a couple of appointments, they're going to add up pretty quick.”



Will asks Question 3: “A lot of times this goes with employment benefits, but with retirement accounts I know i'm trying to max out my savings every year. What should people know about their retirement accounts coming up at the end of the year?”

Heidi responds: “If you haven't maxed out on them and if you can afford to do so, go ahead. It’s never too early or too late to start saving. If you haven't already, start as little as one to two percent of your paycheck.”

“It's scary to jump in and ask, ‘Can I really do this?’ But it's going to be really great for your future, especially if you have an employer that meets your contribution. Whether it's a 401k or IRA or any other retirement option, find a way to start saving immediately.”

Learn more: Retirement Strategies: When Do I Start Saving for Retirement?



Cristina asks Question 4: “Charitable giving is a huge part of the holiday season. Are there any tips on donating money to an organization that we really believe in?”

Heidi responds: “It's so important to give back. One thing that's really new this year is actually a part of a CARES act with the pandemic that's been going on. This allows you to take a charitable deduction of up to $300 without itemizing it. That's a benefit to you when it comes to tax season next year.”



Cristina asks a follow-up question: “So is that something for just this year or for here on out?”

Heidi responds: “It just applies to donations made in 2020 for filing your tax returns in 2021.”

Will also responds: “Basically it's the government trying to incentivize the people who can give, to give more than they typically do concerning everything going on.”



Will asks Question 5: “I learned a lot about estate planning in our last episode, is the end of the year a great time to get that process started?”

Heidi responds: “Absolutely. One thing to keep in mind is you never know. You always want to be prepared, so I like to suggest creating a legacy box. This is in addition to your will. It contains all of that information such as passwords and other important documents within the box. You can leave some fun stuff behind too. Anything you want, really. These are the special things you want to leave behind so when that time comes, your family isn't scrounging around. You want to leave it as easy as possible because the grieving process in itself is hard.”

Learn more: Real Talk: Why You Need an Estate Plan in 2021



Cristina asks Question 6: “Alright Heidi, I know that you are not a tax expert, but you could give us a little bit of advice, so let’s talk about taxes. What are some things that our listeners should do to save money now when they file for their 2020 tax returns?”

Heidi responds: “The best thing you could do is to meet with an accountant or a certified financial consultant. They’re going to be the best people to discuss your options and opportunities where you can gain and save money. You can also max out on your retirement contributions. People over fifty can also make catch-up contributions, which is up to $6,500 in 2020.”

Cristina also responds: “People who are self employed and took advantage of the PPP loan should also get professional help with their finances. I think filing taxes will be a little more challenging this year.”

Heidi adds: “Don’t do it on your own.”

Will also responds: “I’m definitely the type of person who needs someone to give me reassurance when it comes to staying on the right track. I’ve used Credit Karma for the last couple of years and it’s actually really great.”



Will asks Question 7: “So I know that a lot of people have been using their credit card since the pandemic started. A lot of times out of necessity because of where we are. So what can people do to make debt reduction part of their 2021 financial plan?”

Heidi responds: “Get all your debt on paper. There’s nothing more eye-opening than recording all of your expenses down with a pen and paper. Make sure to record your accounts, credit card, the amount on your balance and how much interest it is. Most credit card statements will tell you it’ll take about six years to pay off your credit card debt with minimum monthly payments.”

Learn more: Best Ways to Pay Off Credit Card Debt in 5 Steps



Cristina asks a follow-up question: “So, what is the first step in budgeting?”

Heidi responds: “Step one is identifying what your income is. It’s really easy to get approved for a credit card, have multiple cards and continue to pay the minimum payment each month. It’s easy to pay $25, $75, but that card is never going to get paid off in the amount of money you’re spending on interest. By putting your finances on paper, you’re telling your money where to go instead of asking ‘Where did my money go?’ This is how you build a budget and get your debt paid off faster.”



Will asks a follow-up question: “So Cristina just mentioned a word that I’ve personally used. It’s the ‘snowball effect.’ For example, if you get one of your three or four credit cards paid off, you can now flip it into a free payment into the next highest interest rate. Whether it’ll be a loan, a credit card, you should continue to make these large payments. Is that correct, Heidi?”

Heidi responds: “And that’s exactly it. So the debt snowballed. There’s a couple of different methods but with the debt snowball, you’re starting off with a smaller balance as opposed to the higher interest rate. So that’s one option. The great thing about the debt snowball is that if you have a credit card with a balance of $500 and one with $3,000, it’s going to take you longer to pay off the $3,000 as opposed to the $500. You should aim to get one credit card paid off completely as you move on to the next one. Move in the order of the next largest credit card balance.”

Will also responds: “It’s satisfying, but it also takes a lot of discipline because that payment is free and it’s really easy for people like me to sit there and be like, ‘Well now I have more money in my budget.’ When in reality, you don’t. You gotta stay with it or it doesn’t work.”

Heidi follows-up: “The key is to not go back and use those credit cards.”

Money Management Tips and Savings Strategies for Every Budget and Age


Will asks Quick Question 1: “If people haven’t opened a retirement account yet, what’s an option you think not enough people consider?”

Heidi responds: “It’s going to be the Roth IRA. Usually, everyone immediately says ‘I want to open an IRA’ and immediately overlook two options. So there’s the Roth IRA which allows you to contribute post tax, but then you can withdraw the money tax free.”



Cristina asks Quick Question 2: “What is the most impactful New Year’s resolution that you have made?”

Heidi responds: “Starting my 401k. Believe it or not, I was so scared. That’s why I tell members, it’s just a part of adulting. Actually getting it going was the most liberating thing I’ve ever decided to do.”

Learn more: Are You Planning Financial Resolutions & Smart Financial Goals?



Will asks Quick Question 3: “What debt reduction strategies should people try if they want to pay off credit card debt in 2021?”

Heidi responds: “We talked about this earlier, but the debt snowball is a great method to consider.”



Cristina asks Quick Question 4: “What is one of your financial goals for 2021?”

Heidi responds: “After evaluating how the year has been, I definitely plan on saving for a three to six month emergency fund.”



Will asks Quick Question 5: “What can people who have lost money in the stock market this year do to offset their losses?”

Heidi responds: “They may want to consider selling off losing stocks, especially if they gained in some other areas. Believe it or not, the IRS actually allows taxpayers to recoup up to $3,000 in losses each year.”



Cristina asks Quick Question 6: “What is one good thing that happened to you and your family in 2020?”

Heidi replies: “Believe it or not, it was being quarantined. This year has allowed us to get back to our roots. Quarantine has forced us to be at home and enjoy each other and do fun things together. It was all about getting back to the basics and doing what was important which is spending time with your family.”

Learn more: A Look on the + Side of Life



On this episode, we shared three resources to help listeners wrap up their finances at the end of the year:

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