Questions to Consider Before Year End


Questions to Consider Before Year End

As we are approaching the end of another year, many of us are asking familiar questions.

Have I met my goals for this year? What else do I need to do to get there?

Should we be asking another question, “How can I keep more of what I earn in my pockets and continue growing my nest egg and cash flow?”

The two greatest threats to our accumulation of wealth are spending and taxes.  Of these, we have the most control over spending and a limited control over taxes.  

Reducing our spending and ensuring we invest at least 10-percent of our income is a first step to acquiring wealth.  As the portfolio grows we are encouraged and seek out how to grow it faster.

Many people look at their year end statements every January and figure out how much savings they have.  Or the value of their 401(k)s.  And they might figure out their net worth.  Some real estate investors look at how each property performed, how much cash flow and equity it produced, then consider whether or not to sell any properties and acquire others.

The problem with this is waiting until January.  

If they had looked at what they had in November or December, they might have been able to keep more money in their pockets.  There are several ways to reduce taxes this year and keep more money in your control to grow your nest egg.  


I prefer to start with a personal financial statement, or PFS.  It is modeled after spending many evenings playing the Cash Flow Game ® by Robert Kyosaki.  The key is to organize income and assets so that you can see where the money flows from and where the assets are that you have to work with.

Income is separated into two groups, Steady and Portfolio.  Steady Income includes any pension or Social Security income that you are receiving or have a very high expectation of receiving.  Portfolio Income includes any income from investments such as equities, 401(k)s, IRAs, real estate and any other investments.

I also like to track the assets and liabilities by asset class.  So the Cash and cash equivalent accounts are grouped together, Equities are grouped, and all Real Estate is grouped.  This makes it easier to observe when an asset class is underperforming relative to another class.

Depending on where we are in our financial journey, we may be seeking to position our assets for accumulating wealth, generating cash flow, or reducing taxes.  Or it could be a combination of the three.

By tracking monthly, it is easier to anticipate what is needed through the year, and particularly at year end before the deadline for tax moves.

Are there any properties that you want to sell because they do not meet your expectations?  Maybe they require too much maintenance? Or you just want to sell the dogs and buy nicer properties?

Do you need to generate cash for upcoming acquisitions?

Knowing your overall acquisition and selling desires for the upcoming year may factor into year-end decisions.


If you are selling assets the taxable gain may be mitigated.  For a real estate sale you could use a 1031 exchange if you want to roll the proceeds into another property soon.  

It may be possible to purchase equipment or make improvements that qualify for accelerated depreciation as capital expenses.

Do you have profits that need to be reinvested?  Even if you don’t qualify for a 1031 exchange, it may be advantageous to purchase investment real estate and get a write-off for depreciation.

Another strategy to tap into equity in real estate that has appreciated is to refinance it or obtain a cash-out refinance mortgage.  This avoids the costs of a sales commission and capital gains taxes on the sale.


It might be worth considering selling stocks that have gone down in value, then buy another in the same industry.  This could also be used for mutual funds and ETFs.

Or maybe convert retirement accounts from Traditional IRA to Roth IRA accounts  Or from Traditional 401(k) to a Roth 401(k).  The cost to pay taxes on the conversion may be lower this year than last year if the account has lost value.

Talk to your accountant or tax advisor about your particular situation and any year-end moves that might benefit you.


Are you anticipating a large gain next year?  Are you selling a property?  If so, you might want to delay taking losses this year to offset other gains in the same year.  Or possibly delay other expenses until next year.


Everyone has a unique financial position and financial goals.

There are several year end moves that are good for growing your portfolio if they are considered early enough.  Knowing your current position and tax liability can help you decide which moves can be accomplished in time to minimize tax consequences for the current tax year. This, in turn, helps grow your portfolio faster.

Sharing your current situation and having a discussion with your accountant now can help determine what year end moves work best in your particular situation.


What are some of the year end portfolio changes that you consider?

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