As the year winds down, give yourself a head start on the new year. Take time to review your tax situation, investment strategy, financial goals, and any other issues that can be addressed before December 31st.
Make (or Update) Your Personal Budget
If you haven't already, create a budget that reflects your current financial situation. A budget is like a roadmap for your financial life, offering direction and clear milestones.
Sticking to your budget increases the chance of achieving your life plan. Focus on both short and long-term goals, and maintain a solid emergency fund.
The year-end is an ideal time to update your budget based on life changes that may affect your coming year.
Make and Maximize Contributions to Tax-Advantaged Accounts
Take full advantage of tax-advantaged savings accounts like your 401(k), Health Savings Account (HSAs), or IRAs. Don't leave tax savings on the table when these tools are available.
Most 401(k)s include an employer match, which is essentially free money. Be aware of income limits for Roth IRAs.
Perform a Thorough Tax Review
Ask your accountant and financial advisor critical questions about your tax situation:
- Should you convert a traditional IRA to a Roth IRA?
- Are there losses or gains you should recognize this year?
- Do you have any planned interfamily gifts? If so, what's the best approach?
Talk with Family About Estate Plans
The holidays bring families together, making it an ideal time to discuss important financial topics. Communication is essential when drafting financial, legal, and medical documents.
Make time during family gatherings to address estate planning topics so all documents are current and legally valid for the coming year.
Streamline Your Financial Life
Simplify your day-to-day finances wherever possible. Use direct deposit and online bill-pay systems to reduce administrative overhead.
Set up automatic deposits into savings and retirement accounts. This ensures you're contributing to your financial future without requiring ongoing attention.
Look at Your Credit Score
Your credit score is critical for securing loans and favorable rates. Check your score and identify opportunities to improve it.
Each credit reporting agency is required to provide one free report annually. Review it for accuracy.
Review Your Insurance Coverage
Year-end is the right time to assess your auto, life, homeowners, and other policies. Life changes from year to year, and coverage needs shift accordingly.
Ensure you have appropriate coverage to protect your financial peace of mind.
Evaluate Your Investment Progress
Review your investment strategies in light of your financial goals: retirement, college planning, annual savings, and other key milestones.
Assess where you are versus where you want to be. Talk with a fiduciary financial planner about any adjustments needed for your plan.
