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3 November Money Must-Dos

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Halloween's ghosts and goblins may be headed back into the closet, but for some, an even scarier task awaits: taking care of year-end finances. Before you know it, the holidays will start taking all your attention, so now's the time to get a jump on crossing these items off your to-do list to avoid a panic later on.

1. Deal with your health insurance
If you're fortunate enough to get health insurance at work, then you probably have some decisions to make. At many companies, open enrollment happens in November, giving you your one chance each year to make changes to your health coverage.

The easiest thing to do may be just to leave everything the same, but that can be a big mistake. If you pay for expensive coverage that you never use, then you may be able to save on premiums by getting a less comprehensive health plan. On the other hand, if you know you'll have higher medical expenses in the future -- the most common example is choosing to have a baby -- then paying up for better coverage may save you thousands in medical bills later.

A related decision you may need to make has to do with your flexible spending account. These accounts let you set aside pre-tax money for medical expenses, but you have to use up that money or else you lose it. Although you don't have to spend everything by Dec. 31, you probably do have to decide now how much you'll set aside for 2011. Compare your actual expenses with how much you funded your FSA last year and see how they match up, and if necessary, make adjustments to make sure you don't end up forfeiting any money. With over-the-counter drugs no longer eligible as of Jan. 1, you may also want to make cuts.

2. Get those 401(k)s funded!
As tough as times are right now, it's still important to look forward to long-range financial goals like retirement. With just two months left in the year, you can still ramp up your 401(k) contributions by talking to your HR or payroll department. With maximums of $16,500 for 2010 -- $22,000 if you're age 50 or older -- many workers can boost their contributions quite a bit without maxing out their 401(k)s.

Especially if your employer provides matching contributions, you can't afford not to contribute to your 401(k) right now. Get in touch with whoever runs your 401(k) and find out how to boost your contributions.

3. Protect your big gains
Quite a few investors have seen huge stock price increases in the past year. But many wonder if the recent rally of the past few months has already seen its best days.

If you had the foresight to buy any of the stocks below -- the biggest 10 stocks in the U.S. market that have gained 50% or more -- then you might want to consider protecting those gains from a potential swoon by buying short-term put options. For just a fraction of your profits, you can lock in your gains against a future loss, while also retaining the ability to benefit if the stock keeps rising. Take a look:

Stock

12-Month Return

$ Per Share Gain Since Last October

Cost of at-the-Money Put Option

Apple (Nasdaq: AAPL  ) 59.7% 112.48 17.20
Ford (NYSE: F  ) 101.9% 7.13 0.84
Union Pacific 61.9% 33.51 5.86
DuPont (NYSE: DD  ) 55.4% 16.86 2.46
DIRECTV 65.2% 17.15 1.66
Mosaic (NYSE: MOS  ) 61.4% 27.82 7.35
Deere (NYSE: DE  ) 71.8% 32.10 3.80
VMware (NYSE: VMW  ) 99.0% 38.03 5.40
Las Vegas Sands (NYSE: LVS  ) 204.0% 30.79 4.48
Yum! Brands 53.6% 17.30 2.53

Source: Capital IQ, a division of Standard & Poor's, and Yahoo! Finance. Put option is for January option with strike price closest to current share price.

Admittedly, buying put options can be an expensive way to get portfolio insurance. But with such big gains in the bank, you can afford to give some of them back to ensure an incredibly positive result for your portfolio. And if you've owned these stocks for less than a year and don't want the big short-term capital gains hit from selling them outright, buying puts can be a great way to lock in gains without the tax hassle.

Get going!
The end of the year is still 60 days away, but it's never too early to get a head start on finishing your year-end financial planning. That way, even if you're scrambling through the mall on Christmas Eve, at least you'll know your money's in good shape.

Another way to protect gains is to turn to stocks that will do well in the next bull run. Click here to get The Motley Fool's free report, 5 Stocks the Motley Fool Owns ... and You Should, Too.

Tune in every Monday and Wednesday for Dan's columns on retirement, investing, and personal finance.

Fool contributor Dan Caplinger likes crossing things off lists. He owns shares of Apple. VMware is a Motley Fool Rule Breakers selection. Apple and Ford Motor are Motley Fool Stock Advisor picks. The Fool owns shares of Apple and Yum! Brands. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy is our must-do for you. 


Read/Post Comments (4) | Recommend This Article (14)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 01, 2010, at 12:53 PM, ChrisFs wrote:

    I would skip buying put entirely. The price listed for the Ford put is an option that expires on Nov 20. Yes for $84 of hard earned money, you get to be protected from downturns for a whole 3 weeks!, Being protected until January will cost you $132.

    And commission on top of that.

    If you bought it and you are Foolish, you should have bought in to hold for a while. so buying a put for 3 months protection is not useful.

    If you bought it to speculate, you are on your own, but I would recommend simply holding on.

  • Report this Comment On November 01, 2010, at 2:08 PM, mikecart1 wrote:

    I treat November like any other month. I never lessen my focus and November is no exception. Investing with 100% effort baby!!!

  • Report this Comment On November 01, 2010, at 2:35 PM, edmond5 wrote:

    Just my 2 cents: As an alternative to buying put options on each particular stock, I like taking a % of my portfolio and buying put options on the QQQQ. Or a longer term play might be a bear put spread on the QQQQ at-the-money. Assuming the basket of stocks you choose don't all have pending lawsuits, it should protect nicely against general market declines. Good article Dan, Fool on!

  • Report this Comment On November 01, 2010, at 2:35 PM, goalie37 wrote:

    I'm in agreement with comment #2. The calendar is no reason to change strategies or intensity.

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Dan Caplinger
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Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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