Five ways to end the year financially wisely.

January is traditionally a month when many people make financial changes to their assets. However, one might wonder if it is wise to wait for the new year to make changes to their financial situation. Even now, with only a few days left until the end of December, you can still wisely take advantage of this year's benefits and start fresh on January 1st. Here are some quick tips on how to end the year financially wisely:

1. Pay off debts or make a large purchase:

Each year, the government sets an amount that we can save and invest tax-free. This is non-taxable property. You do not pay tax on this amount. For 2024, this amount is €57,000. You pay property tax on the amount exceeding €57,000 (for fiscal partners €114,000). To determine how much you will have to pay in box 3, the tax authorities look at your balance on January 1 of the current year. If you want to avoid paying taxes, it might be wise (responsibly) to spend some money before the new year. For example, you can choose to pay off debts, make a large purchase (such as a new washing machine or car) before the end of this year. You can also choose to make a donation.

2. Make a donation or gift:

If you have plans to make a donation or gift, you can use exemptions up to a certain amount each year. This means you can make donations without paying taxes on these amounts. For example, in 2024, parents can transfer up to €6,633 to their children without paying taxes. The maximum amount that can be transferred to grandchildren, friends, or other individuals is €2,658. If you planned to make a donation or gift, do not postpone it.

3. Deposit funds into your insurance account (or open one before the end of this year):

With an insurance account (lijfrente rekening), you accumulate funds for the future with tax benefits. Each year you can deposit a maximum amount into your insurance account depending on your annual income. If you are self-employed and do not accumulate a pension, do not have or have insufficient pension from your current employer, or have worked for several employers, opening an insurance account can be a smart way to accumulate (additional) pension.

4. Make an additional mortgage repayment:

If you have a mortgage, it might be wise to allocate some money at the end of the year for additional repayment. Most banks allow you to repay up to 10% of the original loan amount annually. By reducing savings through additional mortgage repayment, you can reduce property tax in box 3, provided your cash balance falls below the non-taxable minimum (€57,000 for one person/€114,000 for partners). Additional mortgage repayment also reduces the interest rate on the loan. The mortgage interest rate depends on what percentage of the property value you occupy. However, additional mortgage repayment may not be beneficial for everyone. In some cases, additional repayments may have drawbacks.

5. Set up automatic transfers to your investment account:

The end of the year is not only a time to save money or use tax benefits but also an opportunity to start the new year wisely. Automatic transfers mean you invest regularly. This way, you get the average purchase price for your investments and become less dependent on market fluctuations.