The year is coming to an end but it’s not too late to get your personal finances in shape. We provide 16 tips on how to start the new year off right.

Unfortunately, it’s human nature to push off thinking about personal finances until the end of the year, if at all. If this describes you, don’t despair! There’s still time left before 2016 draws to a close to make some meaningful decisions, which is why we put together a checklist of important tasks you should consider before the New Year.

Top off your emergency fund
Give yourself and your family the gift of an emergency fund. We typically suggest you set aside three to six months of your monthly spending, but everyone’s situation is different. To help determine what’s right for you, we suggest you read Build the Emergency Fund That’s Right for You. Our recommendation is to keep your emergency fund in a low-risk, liquid account such as a money market fund or savings account – do not invest your emergency fund in the market!

Harvest your losses to lower your tax bill
Tax-loss harvesting is a method of reducing your taxes by selling an investment that is trading at a significant loss and replacing it with a highly correlated though not identical investment. In doing so, you maintain the risk and return characteristics of your portfolio and generate losses that can be used to reduce your current taxes. The tax savings you generate can then be reinvested and will compound over time.

Pay down your credit card debt
Credit cards typically charge as much as 18% on your outstanding balances, so paying off your debt is the equivalent of getting a risk free 18% return. There is no investment product that offers that kind of risk adjusted return.

Pay down your student debt

If you have money left over after contributing to your emergency fund and paying down your credit card debt, then you should consider paying down or refinancing your student debt if it charges an interest rate of 6% or more. Again, paying down debt with a 6% interest rate is like getting a risk-free 6% return, which even Wealthfront can’t match. You might also consider refinancing your student loans through some new companies like Earnest.

Contribute to your 401(k) account
As we explained in Why Your 401(k) Plan Sucks, it makes tremendous sense to contribute at least as much this year to your 401(k) account as your employer is willing to match. If your employer does not offer matching contributions, then you are likely better served investing your savings in a Wealthfront IRA or taxable account. Fortunately, you have until April 15th of next year to contribute to an IRA and still get the tax deduction for 2016, so you don’t need to be in a rush if you choose the IRA over the 401(k) option.

Don’t exercise your stock options if you can wait
Unless you are worried about your employer’s stock price dropping precipitously before year end, you should consider deferring your exercise until after December 31st. That will defer the tax you owe from exercising your options until the 2017 tax year, which you may not have to pay until April 2018.
Open a 529 college savings plan account for your kids

The IRS has given parents an incredible gift to help them save for their child’s college education costs – the 529 college savings plan. When it comes to planning for your family, few things have the potential to prove as financially rewarding as enrolling early in a 529 and growing your savings tax free. That’s why Wealthfront launched its own 529 this fall. In 529 Plans and Saving for College we cover the basics from the types of accounts available and their pros and cons to giving you an idea of how much you’ll likely need to save.

Superfund your 529 college savings plan
If you are fortunate enough to have a more substantial amount of money, superfunding a 529 offers significant benefits both in terms of objective savings results, as well as from a behavioral finance perspective. Instead of the $14,000 annual contribution limit, each parent can pre-fund up to five years’ worth of contributions, up to $70,000 (5 x $14,000). Together, that means a married couple can open a 529 plan with $140,000 for each child and get even more value from compounding the larger contribution from the outset. We explain the benefits of superfunding in greater detail in 529 Plans: The Benefits of Superfunding.

Spend down your FSA
If you have a flexible spending account for health care expenses, usually referred to as a health FSA , and you haven’t used all the money in it, you’ll need to use the bulk of it before the end of the year.  If you don’t use of it by year end, plan sponsors have the option to allow employees participating in health FSAs to carry over, instead of forfeiting, up to $500 of unused amounts remaining at year-end. Check with your plan sponsor to see if this option is available to you. A key difference between these types of accounts and a health savings account is that the latter allows you to roll over all your funds year to year.

Give a tax-deductible charitable contribution
Now is a good time to donate to a cause you believe in and simultaneously benefit from it on your 2016 taxes. Just remember – a tax deduction only saves you a fraction of the total amount you donate, so make that charitable contribution because you really want to support the cause and not just for the potential tax write-off. Giving directly to causes is also deemed a good alternative for those wrestling with whether to pursue a socially responsible investing strategy.

Claim your residential energy efficient property credit
If you, as an individual homeowner who has considered purchasing residential alternative energy equipment, such as solar hot water heaters, solar electricity equipment, etc., you should consider this tax credit. The credit runs through 2016 for qualified geothermal heat pumps, small wind turbines and fuel cell property placed in service by December 31, 2016 and has been extended for solar electric property and solar water heating property placed in service through December 31, 2021.  For 2016, the credit is 30%2 of the cost of qualified equipment. And according to the IRS this generally includes labor costs when figuring the credit, and you can carry forward any unused portions of this credit.

Review your insurance policies
Make sure you and your loved ones are well protected if something happens to you. Now is a good time to consider whether any major life changes, like the birth of a child in the past year, might mean the need for insurance. If you do have enough coverage, it’s still a good time to review the different types of coverage you have. As we explained in Why Whole Life Insurance Is a Bad Investment, term life insurance makes more sense for most young people than whole or universal life insurance. And while it might seem like a bad time to do so, it is actually a good time of the year to gently review with parents or elders their own coverage. Long-term care coverage for older parents is one area often overlooked, even by many financial advisers. Also, many retiring boomers fail to consider how much they will have in the way of out-of-pocket healthcare costs post-retirement. If you want to perform a quick back-of-the-napkin calculation to estimate these costs for an older parent or loved one check out this free one-click cost calculator.

Turn on Stock-level Tax-Loss Harvesting in your Wealthfront account
If you are a Wealthfront client who has invested at least $100,000 with us in a taxable account, there’s no time like the present to opt in to our Stock-level Tax-Loss Harvesting service. Stock-level Tax-Loss Harvesting is unique in that the more money you invest, the greater the potential tax benefit. That’s because the more you invest, the more securities you own. The more securities you own, the greater the opportunity for harvesting losses.

Review your spending and set up automated savings
As our CIO Dr. Burt Malkiel says “Start saving early and save regularly. You will do very, very well over time and likely have a very happy retirement when the time comes.” To do that, you need to reflect on your spending and develop a budget for next year. So, take advantage of the time you have during the holidays and bite the bullet. A great step after setting a budget for 2017 is to take the pressure off and just automate your savings to your emergency fund and your investment accounts. You can read more of Dr. Malkiel’s suggestions at Burt Malkiel’s Rule for Young Investors: Save Regularly. Yes, we are intentionally reiterating the point of saving regularly.

Roll over your old 401(k) into an IRA
Most 401(k) plans are poor performers and the fees you pay on them add up (as we pointed out in Why Your 401(k) Plan Sucks). If you leave one company for another, it’s usually a bad idea to roll your 401(k) over into your next employer’s 401(k) unless you’re lucky enough to find one of the few good plans that offer Vanguard index and target date funds. Consider rolling your old 401(k) over into a low cost, set it and forget it Wealthfront IRA.

We want to sincerely thank all of our clients who trust us every day with their hard earned money. We promise to continue to deliver value to you in 2017 and beyond. In the meantime, please let us know if you have any other suggestions that we should share. Happy Holidays!

2. Fuel cell property, however, is subject to a limitation, which is $500 with respect to each half kilowatt of capacity of the qualified fuel cell property.

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Financial advisory services are offered by Wealthfront Inc., an SEC-registered investment adviser. Brokerage products and services are offered by Wealthfront Brokerage Corporation, member FINRA / SIPC, and a wholly-owned subsidiary of Wealthfront Inc. Please see our Full Disclosure for important details.

The Wealthfront 529 College Savings Plan (“the Plan”) is sponsored by the State of Nevada, acting through the Board of Trustees of the College Savings Plans of Nevada, and administered by the State Treasurer’s Office. Ascensus Broker Dealer Services, Inc. serves as Program Manager. Wealthfront Brokerage Corporation serves as distributor and underwriter of the Plan. Consider the investment objectives, risks, charges, and expenses of any 529 plan before investing. Please review the Plan Description and Participation Agreement carefully before investing. Request one by calling us at (844) 995-8437 or emailing Your investment is not insured or guaranteed by the State of Nevada, the Board, Plan or any state official, the FDIC or any other federal agency, the Program Manager or Wealthfront.

This blog was prepared to support the marketing of Wealthfront’s investment products. Nothing in this communication should be construed as an offer, recommendation, or solicitation to buy or sell any security. Wealthfront’s financial advisory and planning services, provided to investors who become clients pursuant to a written agreement, are designed to aid our clients in preparing for their financial futures and allow them to personalize their assumptions for their portfolios. Additionally, Wealthfront and its affiliates do not provide tax advice and investors are encouraged to consult with their personal tax advisors.

All investing involves risk, including the possible loss of money you invest, and past performance does not guarantee future performance. Margin lending can add to these risks, and investors should carefully review those risks as part of their overall financial strategy. Diversification strategies do not guarantee a profit or protect against loss in declining markets.  Wealthfront and its affiliates rely on information from various sources believed to be reliable, including clients and third parties, but cannot guarantee the accuracy and completeness of that information.

There is a chance that Wealthfront’s tax loss harvesting strategy may generate a higher number of trades due to attempts to capture losses and may create capital gains, wash sales, and could be subject to higher transaction costs and market impacts. The utilization of losses harvested through the strategy will depend upon the recognition of capital gains in the same or a future tax period, and may be subject to limitations under applicable tax laws, e.g., if there are insufficient realized gains in the tax period, the use of harvested losses may be limited to a $3,000 deduction against income and distributions. Such losses may be carried forward to offset future capital gains, if any exist.

Wealthfront only monitors for tax-loss harvesting for accounts within Wealthfront. The client is responsible for monitoring their and their spouse’s accounts outside of Wealthfront to ensure that transactions in the same security or a substantially similar security do not create a “wash sale.” If a wash sale transaction occurs, the IRS may disallow or defer the loss for current tax reporting purposes. A client may request (online or by calling Wealthfront at (844) 995-8437) that Wealthfront monitor the client’s spouse’s accounts or their IRA accounts at Wealthfront to try to avoid the wash sale disallowance rule. If Wealthfront is monitoring multiple accounts to avoid the wash sale disallowance rule, the first taxable account to trade a security will block the other account(s) from trading in that same security for 30 days. Learn more about wash sales.

Remember, Wealthfront may lack visibility to certain wash sales that might occur as a result of trades in external, unlinked, or unmonitored accounts. In some cases, Wealthfront may not be able to provide notice of a wash sale in advance of the Client’s receipt of IRS Form 1099.

About the author(s)

Andy Rachleff is Wealthfront's co-founder and Executive Chairman. He serves as a member of the board of trustees and chairman of the endowment investment committee for University of Pennsylvania and as a member of the faculty at Stanford Graduate School of Business, where he teaches courses on technology entrepreneurship. Prior to Wealthfront, Andy co-founded and was general partner of Benchmark Capital, where he was responsible for investing in a number of successful companies including Equinix, Juniper Networks, and Opsware. He also spent ten years as a general partner with Merrill, Pickard, Anderson & Eyre (MPAE). Andy earned his BS from University of Pennsylvania and his MBA from Stanford Graduate School of Business. View all posts by Andy Rachleff