WSJ: Topsy-Turvy Money Ideas to Set You Right


When the financial world looks upside down—and news out of Europe and Washington suggests it is that bad—maybe it's time to follow suit and turn your money habits topsy-turvy as well.

Contrary to conventional wisdom, there are some regular money moves that are better done at the beginning of the year rather than the end.

Here are five big ones:

1. Tap your flex-spend account early
Opticians routinely urge you to spend your unused medical flexible-spending account in December.

That's backward. Start the year with a trip to the eyeglass store for a new pair of spectacles or two.

Your FSA is provided by your employer but funded with your pretax dollars. You elect an amount for the whole year (say, $2,400), but it's funded through equal payroll contributions throughout the calendar year ($200 a month).

The bonus is that you get to start spending the whole amount (in this case, $2,400) on Jan. 1 as long as it is for eligible medical expenses, like eyeglasses and prescriptions.

If you spend it all by February, then it's better than a low-interest loan. It's a no-interest loan and there's a chance you may not have to "pay it back." If you get fired or quit before year-end, in general your employer has lost out, not you. (That's the way the government set up the rules.)

2. Make your charitable donations now
Some people wait until December to make charitable donations. The idea is that you have a better handle on how much money you can spare.

That's upside down.

If giving to charity is important to you, why wait? Write your check now and feel satisfied. If you are worried whether you will have enough money to live on during the year, then write a smaller check or cut back on other expenses. I've never heard of anyone going broke because he gave too much to charity.

You'll get the same tax deduction making a donation early in the year as you would later, but the charity benefits by having the money sooner.

3. Contribute to your IRA in the spring
It can be tempting to wait and see what money you have left after Christmas before committing anything to an individual retirement account. Don't wait. Do it as soon as you can.

If you fund the account early, you will find a way to make your remaining dollars stretch. What's more, the funds in the account will grow tax free. Any interest you earn outside the IRA will be taxed, so the sooner you get your contribution done the better.

If, like many people, you wait until mid-April to contribute to last year's plan, then this year make a change. Double down by contributing to both this year's and last year's accounts at the same time. You'll get an extra year of earnings inside your plan.

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