Money Moves to Make BEFORE 2025

Can you believe December is already one week away? 

That means the end of another year, and with it, fun adult activities like Spotify Wrapped, New Year Resolutions, and everyone's favorite: Taxes.

Speaking of which, there are a couple of money moves you should probably be thinking about, and I wanted to use this newsletter to share them with you before we all check out for the holidays.

Oh and don't forget to check my latest video that I just posted on why $100K is such a pivotal net worth goal, and some tips to grow your net worth by $100K faster. Here's the link: https://youtu.be/Rjo2W3xuyhw

Harvest Your Losses

Tax Loss Harvesting is a strategy used to minimize your tax bill from your investments each year. Here's how it works:

Let's assume you have sold some stocks for a profit this year. Your brokerage will tally up those numbers and send them to the IRS, and then you will have to pay tax on those gains. 

BUT, they also subtract out any losses from stocks you've sold for the year. For example, you may have sold some Nvidia stock and pocketed $1,000, but you may have also lost $1,000 from another stock that went down this year, like Nike. In this case, your total gain is zero and you wouldn't owe taxes. 

Keep in mind, the IRS only counts profits and losses from investments you ahve SOLD this year. And this is why we call it "harvesting."

If you've made some money in stocks this year and want to lower your overall gain, AND you also have some stocks you're holding that are currently down, you can "harvest" or sell those stocks so that the losses help offset your gains and reduces your overall tax bill.

Keep in mind this is a high level overview and if you want to learn more, you should definitely talk to a qualified CPA.

Contribute to Retirement Accounts

Retirement accounts are one of the most powerful wealth generating tools, because they allow you to skip out on taxes. 

They are so powerful in fact, that the government limits how much money you can put in each year.

Luckily the limits are pretty high, but your contributions reset each year. So any amount you don't contribute this year you lose out on. (technically you can "catch up" at a certain age, but in my opinion it's not meaningful enough of a catch up to discuss further).

Here are the limits for the year:

1. 401K: $23,000
2. Traditional IRA: $7,000

Roth IRA's are a bit trickier than a Traditional IRA becuase it depends on your income for the year, but you can always just contribute to a Traditional IRA and roll it over to a Roth.

Rebalance Your Portfolio

At least once a year, it's a good idea to check your portfolio and make sure you don't have too much exposure to one asset.

For example, you may have started with 10% Nvidia at the beginning of this year, but it may be up to 20% or 30% of your portfolio now because of how much their stock has increased. 

This means you made some good money, but do you really want 30% of your portfolio in this one stock? I would argue that's pretty risky. The inverse is true for investments that are a smaller part of your portfolio than you would like them to be. Rebalancing once or twice a year can take as little as 5 minutes and is a fantastic way to reduce risk in your portfolio.

Next Steps

Before the year ends, make sure to consider Tax Loss Harvesting, Retirement Contributions, and Portfolio Rebalancing. These are fundamental strategies to growth your net worth and eventually reach financial freedom.

Until next time,

Brian