With the year coming to an end, you’ll likely see dozens of articles suggesting ways to reduce your taxes and improve your portfolio. If you’ve been engaged with our newsletter for a while, you know we favor making regular tweaks throughout the year to minimize taxes and maximize total return over the long-term. That said, we love a good tip or trick just as much as the next guy, so we’ve compiled a few of our favorites you can implement in December to help reduce your tax bill in 2019.

INCREASE YOUR RETIREMENT PLAN CONTRIBUTIONS

The maximum amount you can contribute to an employer retirement, such as 401(k), is $19,000 for 2019. If you are age 50 or older, you can take advantage of an additional “catch-up” contribution of $6,000. Likewise, you can contribute a maximum of $6,000 to an IRA with an added $1,000 if you are 50 or older. Generally, you have until December 31, 2019, to contribute to an employer retirement plan and until April 15, 2020, to contribute to an IRA.

If you are self-employed, you may want to consider establishing an individual 401(k). The plan must be established and partially funded before year-end and should be done under the guidance of a CPA.

USE HSA TO PLAN FOR FUTURE HEALTH CARE COSTS.

For those with a high deductible health insurance plan, you are eligible to contribute up to $3,500 and $7,000 for families in 2019 ($8,000 if you are age 55 and over) to a Health Savings Accounts. Similar to a 529 plan, contributions made to an HSA grow tax-free and withdrawals used to pay for qualified medical expenses are also tax-free.

FUND A 529 EDUCATION SAVINGS PLAN

Contributions made to a 529 plan grow tax-free and withdrawals made for qualified education expenses are also tax-free. You can give up to $15,000 per beneficiary each year ($30,000 from a married couple) without filing a gift tax return. With some restrictions, it is possible to give more with “superfunding” (5 years at one time.)

DONATE TO CHARITY USING APPRECIATED STOCK

If you itemize on your tax returns, giving away appreciated stock allows you to not only deduct the full market value of the donation but also avoid paying capital gains on that appreciation. If you make donations on a regular annual basis but do not qualify to itemize, you may consider putting several years of gifts in a donor-advised fund. This may allow you to itemize your deductions in the current year while maintaining control over the specific timing of your donations to qualified charities over time.

If you had the choice between a premium chocolate truffle for 15 cents or a Hershey’s Kiss for a penny, which would you choose?

If you’re like most people (75%), you’ll gladly splurge on the truffle. 

Now, consider a different scenario. The prices have been discounted by a penny each: You can buy the premium chocolate truffle for 14 cents, or get a Hershey’s Kiss for free.

Astonishingly, 69% of people will opt for the Hershey’s Kiss simply because it’s free. How could something as insignificant as a penny determine whether people enjoy a rare delicacy versus a chunk of foil-covered sugar you can find in any checkout aisle?

These are the questions Dan Ariely explores in Predictably Irrational: The Hidden Forces That Shape Our Decisions.

Most of us fancy ourselves as savvy decision-makers, capable of seeing through finely crafted sales pitches, advertising slogans, and faulty advice. But as Ariely reminds us, the human brain is a flawed instrument that drives us to behave in ways contradicting our self-interest—often without us knowing about it.

From planning meals to planning vacations, buying candy bars to houses, we consistently overpay, underestimate, and procrastinate – and we can’t help it. Horrifying! 

But there’s good news: Our misguided behaviors are neither random nor senseless. As Ariely notes, they’re systematic and predictable—they make us “predictably irrational.”

At the risk of sounding too Zen-like, admitting you don’t have total control of your thoughts and behaviors gives you more control than the person who’s convinced they never make mistakes. Keeping that in mind, here are three key takeaways from Predictably Irrational that can untangle the wires in your brain:  

Put important decisions and habits on autopilot: This is like a cheat code for beating procrastination. For example, we help clients set up automatic savings plans to avoid the “I’ll do that someday” trap.

Remember to be suspicious of “free”: The prospect of getting something for nothing is powerful. Truthfully though, everything comes with a price tag. A free lunch might be used as leverage for a favor down the road. You got “free” shipping because a pop-up told you to stuff your cart with items you don’t want or need. Our encouragement? Try getting curious about how you are paying for any “free” item offered to you. It might help you make more informed choices.  

Strategically reduce your choices: Sounds counterintuitive, but when people have too many options, they freeze up and make suboptimal decisions. But the antidote isn’t learning to make better decisions—it’s eliminating the ones that don’t matter. At Hill Investment Group, we boil down decades of research to give clients only the relevant information.

We’ve come across plenty of books about behavioral economics that are mind-numbingly complex and laden with jargon. This isn’t one of them. Ariely’s writing is as informative as an academic lecture and isn’t boring.

Once you dive into this book, you’ll never make decisions the same way again.

My daughter attended Incarnate Word Academy, a private high school with an exceptional leadership program, led by an inspiring teacher – Charles Kafoglis. The Young Leaders Program has an innovative curriculum and is one just a few high schools to offer students a concentration in leadership studies. I’ve witnessed the positive impact Charles and his program had on my daughter. I told the HIG team about the courses offered at the school and the personal finance module caught the attention of our fearless leader – Matt Hall. An introduction to Charles was inevitable and followed with an invitation for Matt to speak at the school’s “Leadership Live!” speaker series.

The students, Charles and Matt worked together to come up with a fun, student-led Q & A with the goal of energizing and inspiring these young women to change the way they think and feel about money. Matt took the stage in early November and engaged a packed auditorium with thought-provoking concepts around money, leadership, and entrepreneurship.

Matt encouraged the 9th through 12th graders to take control of their financial futures by saving early, understanding the value of compounding and using money wisely. When the 3:25 PM dismissal bell rang, signaling the end of Matt’s interview and the end of the school day, many students didn’t run out the door, but instead swarmed Matt to ask questions and receive copies of Matt’s book, Odds On. If Matt had hoped to reach only a few students that day, I’d say he more than accomplished the goal.