Help Today’s Self
Help Today’s Self
Adam M. Grossman December 13, 2020
SO MUCH OF PERSONAL finance is focused on our future self—and that’s a challenge. Think about the standard prescriptions: Open an IRA. Maximize your 401(k). Save for college. Save for retirement. Build an estate plan.
These are all about the future—often the very distant future. An enormous amount of time and energy is spent planning for “someday.” But it’s equally important to focus on things that can be done to benefit you today. As we head into year-end, it’s a good time to conduct some financial housekeeping along those lines. Here are eight recommendations:
1. Organization. Over the course of a career, it’s not uncommon to wind up with a collection of financial accounts, including multiple IRAs and 401(k)s from old jobs. Often these can be combined, making your finances simpler to monitor and manage. But this doesn’t always happen—and not just because folks are deterred by the paperwork involved. Another reason: Many people don’t even realize it’s possible. Fortunately, the IRS provides this handy chart showing exactly which accounts can and can’t be merged together.
2. Spending (part I). In his 1758 book, The Way to Wealth, Ben Franklin wrote, “Beware of little expenses. A small leak will sink a great ship.” He was ahead of his time. In recent years, more and more companies have refashioned their business models around small, recurring charges. Think Netflix and Spotify. Many of these services are great, but it’s easy to lose track of the little charges and to continue paying for services you no longer use. Fortunately, there’s a growing number of solutions. Credit cards like Discover offer a “recurring payments dashboard.” A number of apps can help you identify and cancel old accounts.
3. Charitable giving. A few years back, a longstanding pillar of the tax code changed. As of 2018, deductions for state and local taxes were curtailed, while the standard deduction was substantially increased. Result? Many people who used to itemize deductions, and therefore receive a deduction for every dollar given to charity, are now covered by the standard deduction. This means they no longer receive an incremental tax benefit from charitable donations. This has led many people to adopt an every-other-year strategy for donations.
This year is an exception, however. A provision in the coronavirus-related CARES Act offers a special onetime “above the line” deduction for a cash donation of up to $300. “Above the line” means that everyone can benefit. The upshot: Even if you no longer itemize your deductions on your tax return, be sure to let your accountant know if you’ve made charitable contributions.
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