Your last paycheck of the year might feel like nothing special, but you can actually use it as an opportunity to improve your financial life.
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Not only does it come at the perfect time for a financial review, getting income before the end of the year also allows you to make some moves before the calendar turns over. Here are some steps you can take to make yourself richer with the last paycheck of the year.
Maximize Year-End Retirement Plan Contributions
An important move to make before the end of December is to contribute as much as you can to your employer’s retirement plan. While some tax-advantaged accounts, such as IRAs and HSAs, allow for contributions all the way up until your tax-filing deadline, you can only put money into 401(k) plan and 403(b) plans until the end of the calendar year.
Your final paycheck is your last chance to boost your contribution before the new year starts — and the more you can sock away in your tax-advantaged retirement plans, the more likely you are to end up richer over the long run, thanks to both tax savings and compound growth.
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Upskill Yourself
Many wealthy individuals, including the sixth-richest person on Earth, Warren Buffett, say that the best investment you can ever make is in yourself.
When you get your last paycheck — particularly if it includes a bonus — it can be a good time to spend that money on upskilling yourself. Consider using some of that money to enroll in educational courses or workshops that can either broaden your skill set or deepen it.
By improving your marketability, your investment can significantly boost your lifelong earnings.
Review Your Investments
The end of the year is a traditional time for investors to review their portfolios. When you get your last paycheck, first verify that the correct amount is being deducted to your savings and investment accounts. Then, review your portfolio as a whole.
It’s likely that your asset allocation is out of balance if you haven’t made any changes since last year. If you intend to have 70% in stocks and 30% in bonds, for example, by year-end you might find that balance may now be closer to 60/40, or even 50/50. To keep your portfolio with your intended risk and reward profile, you may have to make some year-end adjustments.
Analyze Your Budget
Once your final paycheck arrives, you’ll finally have a full year’s worth of income and expenses in the books. This is a great time to look back and analyze your budget.
Were you able to live within your means? Did you save and invest as much as you intended? What changes should you make for the coming year to ensure that you remain under-budget and up your financial gain to get out of debt and boost your savings?
All of this data is available once you wrap up the year with your final paycheck. Performing this type of financial analysis can help boost your net worth in the coming year.
Save and/or Invest Your Bonus
Many year-end paychecks come with an annual bonus. This offers you an excellent opportunity to boost your savings and investments without much effort at all. As your bonus is by definition “extra” money, it won’t feel like it comes out of your pocket if you simply divert it to your savings and investments.
Many experts recommend investing all sources of “found” or “free” money, such as year-end bonuses or tax returns, as you aren’t relying on them to fund your day-to-day budget. Doing this every year can really pad your retirement nest egg.
Pay Off Debt
Regardless of the time of year, one of the best ways to improve your financial life is to pay off your high-interest debt. Typically, this comes in the form of credit card debt, which can charge annual interest rates of 25% or more.
Diverting some of your year-end paycheck and/or bonus towards your high-interest debt can get you out of a financial hole before you dig yourself in any deeper, and that’s a key step in the quest to make yourself richer.
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This article originally appeared on GOBankingRates.com: 6 Ways To Make Yourself Richer With the Last Paycheck of the Year
