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Financial Planning Tips

Roseville, Calif. – Fall is upon us and the holiday season is quickly approaching. For most people, once the calendar page turns to November, thoughts turn to holiday planning and shopping for gifts.

But before the holidays begin in earnest, take a moment for some financial planning.

“Fortunately, there is still time to implement some strategies before the end of the year,” said Petra Chien, Vice President/Wealth Strategist for First Bank’s Wealth Management Group. “However, once the clock strikes midnight on December 31st there is no looking back. Taking a few simple measures now can prevent a post-holiday financial hangover.”

With the clock ticking, the following are five steps from First Bank to set you on a firm financial path for the New Year:

Don’t miss your company’s benefits open enrollment

Around this time of year is the open enrollment period to select your company benefits for the next year. Generally, this is a passive process and your prior elections carry over to the next year. However, if your needs have changed you may want to revisit all the options available. If your company offers a flexible spending plan, this is a great way to pay for out-of-pocket medical expenses and the contributions to your account can reduce your taxes. One caveat, make sure you understand if the plan falls under the carry over rules or use-it-or-lose-it rules.

Estimate your tax bill

There are several online calculators that can give you an estimate of your 2015 tax bill. This can help avoid being caught off guard when you file your taxes next year. If you are estimated to get a large refund, then you may be withholding too much from your paycheck. This is essentially an interest-free loan to the government until next spring. On the other hand, if you owe more taxes than you have withheld, then keep enough saved for your tax liability next year. Over spending during the holiday season may put you in a bind. Adjust your allowances to reflect your individual tax situation.

Review your investments

Holding actively managed mutual funds in a taxable account requires some of your attention. Most active mutual funds will pay out capital-gains distributions towards the end of the year. This is income that may increase your tax liability. Keep an eye out for these distributions so you are not surprised come tax time. If you need ways to reduce your tax bill, consider harvesting some losses. Always check with your tax professional before you do. They will be able to tell you how much or if this works in your particular situation.

Watch your retirement contributions

At a minimum contribute to your company’s 401(k) to get the full employer match. This is tax-deferred income and part of your company benefits. If your budget allows it, try to contribute the maximum allowed to the 401(k). In 2015 this amount is $18,000 and individuals 50 years of age or older are able to save an extra $6,000. An added benefit of stashing away extra into your 401(k) is it reduces your taxable income.

‘Tis the season of giving

In certain situations it may make sense to gift appreciated securities to charity or your children instead of cash. Also, if you itemize your deductions and need to reduce your tax bill, consider cleaning out your closest and taking these household items to a charity in need. Make sure to do this (and get a receipt) before December 31st in order to claim the deduction for 2015. 

First Bank is one of the largest privately owned banks in the country with $5.93 billion in assets and 111 locations in Missouri, Illinois, and California.

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