Every New Year, countless Americans make grand resolutions to better themselves, only to see their self-improvement dreams fizzle out a few weeks later. This can happen for a number of reasons -- we set unrealistic goals, we don't have tangible measures of success, we don't plan how to achieve our goals, and so on.
If you're resolving to make 2016 your most financially prosperous year yet, then you need to set yourself up for success. So here are five moves to make before another year goes down in the books.
1. Take a hard look at your 401(k)
Saving for retirement is important, but if you're simply funneling money into your 401(k) plan without bothering to track your investments, then you could be throwing that money away. Logging into your account on occasion and mentally noting your ending balance isn't enough; you need to pay attention to where your retirement dollars are allocated. If you're decades away from retirement, then consider investing in aggressive growth-stock funds. Even if your balance takes a hit during periods of market volatility, you have enough time to ride it out. On the other hand, if retirement is less than a decade away, consider a more conservative, bond-heavy approach. Of course, you want to keep your investments balanced and diversified, but the key is to make sure they're actually serving your needs.
2. Use up your FSA balance
Remember when you allocated money to your flexible spending account during open enrollment? Now's the time to check that balance and make sure you deplete it before your plan year is up. FSAs operate under a use-it-or-lose-it policy, so if you fail to rack up enough eligible expenses by year's end, you'll be throwing that leftover money away. Even if you don't have any immediate medical needs, you can get creative to avoid letting that cash go to waste. Try renewing a prescription several months in advance, or stock up on contact lenses, which typically carry lengthy expiration dates.
3. Make some donations
Not only is donating to charity good for the soul, but it can also help reduce your tax burden for the year. As long as you itemize on your taxes, you can deduct eligible contributions to your favorite charities or organizations. The same applies to any goods you choose to donate, from gently used clothing to toys to electronics. Keep your receipt, and you can deduct the estimated value of the items you unload. As an added bonus, you'll free up some storage space and score points for decluttering.
4. See how your budget is holding up
Your budget is only as good as your ability to stick to it. Now's the time to take a hard look at your budget and see whether you're spending wisely or falling short. Review the various categories your budget covers, see how well you're faring, and determine whether you need to make any adjustments for the upcoming year. If, for example, you're anticipating a rent increase, you'll need to modify your budget accordingly. Similarly, if you have $400 per month earmarked for groceries but see that you've exceeded that amount consistently, then you should consider shifting money over from a different category to accommodate your spending habits or reevaluate the way you shop.
5. Sell some investments at a loss
Selling off assets for less than what you paid for them may be a difficult pill to swallow, but if you've made money on other investments, then it may be in your best interest to cut some of your losses. If you sell a stock or bond at a loss, it can offset your gains and the taxes that come along with them. Even if you don't have gains to offset, you can still write off any loss you take against your income, up to the amount of $3,000. And if your loss exceeds the $3,000 threshold, you can carry the surplus over to help reduce your taxes in future years. Just be aware that you can only claim a loss on your taxes if it originates from an account that isn't already tax-advantaged, like a 401(k) or IRA. Also, don't get cute and think you can sell a stock at a loss and then buy it back days later. That's called a wash sale, and the IRS won't let you get away with it.
Even if you've sworn off resolutions for good, you can set yourself up for financial success in the new year by taking a few simple steps. And, unlike joining a gym, it won't even make you break a sweat.