Start your year-end saving and tax planning now

Linda Stern

The next three months can make 2006 your most successful yet, if you manage your money right.

In the next 89 days, you'll deal with holiday bills, year-end tax planning, paycheck positioning for 2007 and more. Here's how to make the most of it.

-- Start your holiday shopping now, before you succumb to post-Thanksgiving frenzy.

Write a gift list, and be on the lookout for gifts that fit. Create a holiday budget and stick to it. If you see a good deal on generic gifts, like candles or candy dishes, pick up a few so you'll have them on hand for occasions when you need to come up with a small gift in a hurry.

-- Sell losing stocks.

With the Dow Jones Industrial Average breaking its record, you may not have those losses for long. If you're losing money on a stock you want to keep, you can "double up," according a new tax guide by brokerage firm A.G. Edwards.

Buy more shares now, so you have double the holdings. Wait 31 days and then sell the original shares. In a worst case scenario, the price will go up so much in 31 days that you won't have a loss. You will have made money!

This strategy helps you get around the wash sale rule, which prohibits taking a loss on a security and buying the same security within 31 days.

The last day to do this and still claim a loss on this year's tax return is November 28, according to the brokerage firm. If you miss that date, you can still sell your losers up until December 31. You just won't be able to buy the same company back in 2006.

-- Create your retirement plan if you're self-employed and you don't have one.

It's true that you can wait until your tax-filing date, typically April 15, 2007, to set up a SEP IRA or a Roth IRA. But if you want to set up a solo 401(k) account, you have to do it by the end of the year if you want to make contributions that will be deductible in 2006. Take time now to study the plans and find the right one for you.

-- Plan your giving for the rest of the year.

Most people squeeze most of their charitable gift-giving into November and December, because that's when most charities come calling, and because they want to get in their tax-deductible donations before year end. That makes a lot of sense, but it's better to give deliberatively.

Instead of writing lots of little checks, take some time to figure out which causes are nearest to your heart. If you have $10,000 or more to give and don't want to rush through those decisions, open an account with a donor-advised gift fund.

These mutual funds give you a charitable deduction when you open the account but you can decide how to allocate the money later. They are available from most major no-load mutual fund companies.

-- Set up next year's paycheck.

If you typically lend money to Uncle Sam, stop. Decrease your withholding so that you won't get a big tax refund in April 2008. Instead, you'll have the use of more of your own money in every paycheck.

Use that extra to bump up your savings. Increase your contribution to company retirement plans and health savings plans for next year.

-- Spend down your use-it-or-lose-it accounts.

If you've got money sitting in a flexible spending account for health care or for childcare, check to see whether it will carry over into next year. If it won't, make sure you spend it. Give your babysitter a bonus, get an extra pair of prescription sunglasses, or do whatever it takes to make sure you use money you wouldn't otherwise.

-- Check your gift cards and credit cards.

Got gift cards sitting around since last Christmas? Make sure they're not about to expire. If they are, use them up, even if you use them to buy gifts for others this year. And some of your credit card points might be expiring, too: Make sure you cash them in on time.

(Linda Stern is a freelance writer. Any opinions in the column are solely those of Ms. Stern. You can e-mail her at

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