With the year coming to an end and the holiday season upon us, it’s easy to put financial planning on the backburner. If you take a little time now to organize your money, you can set yourself up for a stress free, and more prosperous new year. It’s basically the gift of financial peace of mind for your future self.
These aren’t big, complicated moves. They are practical, achievable actions that can do a lot for your bottom line. Now, let’s get into how you can end the year with your finances in good shape and be ready to take on whatever comes.
Review Your Budget
Take a closer look at your budget before the year is out. Did your spending match your goals? How much did you spend on the categories you didn’t spend enough on? This review can help you know how to spend smarter or save more and tweak your budget for the new year. Think about subscriptions or services you don’t need anymore that you can cancel. Think about how your financial habits this year have affected your overall financial goals.
Pay off High-Interest debt
Credit card balances are high-interest debt and can have a big negative impact on your future. You want to pay off or at least reduce these debts significantly. A little bit extra before year-end can make a big difference in the interest you’ll pay over time. Check out balance transfer offers or lower-interest personal loans to consolidate your debt. Setting up an automated payment plan can even help keep you on track to becoming debt-free.
Use Flexible Spending Accounts
If you have an FSA, remember that many of these accounts are subject to ‘use it or lose it’ rules. Before they expire, check your balance and use up any leftover funds for eligible expenses, like medical supplies or checkups to eye care. Prepay for services that can soon be scheduled, like dental work or therapy, that are eligible for prepayment. Double check your plan’s expiration rules and deadlines.
New Year, New Financial Goals
A new year means a new opportunity and what better time to set some financial goals? Whether you’re saving for a trip, building an emergency fund, or buying stocks, having goals will make you more likely to stick with them. Make these goals smaller, actionable steps. Make time to regularly review your progress over the course of the year to make sure you’re still on track, and correct as needed.
Max Out Retirement Contributions
If you haven’t hit the max on your retirement contribution yet, now’s the time. It helps you save money in a 401(k) or IRA, which will help you build your future nest egg and build up your taxable income for the year. Make sure to take advantage of free money by checking if your employer has any end-of year matching contributions. Then review other tax advantaged accounts like HSAs that may help your long term savings.
Invest to Rebalance
Check your investment portfolio to see if it’s still on track. It’s important to rebalance because you want to make sure you stay in tune with the changing markets throughout the year, and don’t get too much risk exposure or miss out on the opportunity. Look for a diversification across asset classes to lower your risk. In addition, tax loss harvesting strategies are also applicable should you have any before the year ends.
Organize Tax Documents
It’s not tax season yet, but it’s not too early to get organized. Be sure to collect receipts, records of donations, etc. which have anything to do in with the deducted or credit. Filing your taxes can be easier and maybe even quicker with a little prep work. Take this time to figure out how much tax you’ll owe and, if necessary, make an adjustment to your withholding so that you’re not surprised come tax time. You can use digital tools or apps to organise and save your tax document securely.
Make Sure You Are Covered
With life changing fast, so should your insurance. Check your health, life, home, and auto insurance policies to make sure you’re covered. It’s also a good time to see if you can find better rates or bundles. Look into whether you want extra coverage, like disability insurance or umbrella insurance. If you’ve made big purchases this year, make sure those are covered, too.
Update Your Beneficiaries
Have you ever looked at the beneficiaries on your accounts? If you’re married, divorced, or have a child, it may be time for an update. This is a small step that should prevent you from future problems. That includes retirement accounts, life insurance policies, and certainly bank accounts that are payable on death. Make sure that all beneficiary contact information is correct.
Get a Financial Check-Up
Take a second to think about the health of your finances. See how you are doing with your savings and where your plan is lacking. It’s your financial wellness exam without the doctor’s office. Find where you could improve, for example, reducing wasting money or raising savings rates. Consider consulting a financial advisor if you’d like a professional perspective on your long-term plans.
Create a Charitable Giving Plan
If giving back is important to you, now is a good time to put together your charitable giving plan or review your current one. Decide which organizations you want to support, decide how much you want to give, and learn how to give more e.g., by donating appreciated assets or using donor-advised funds. Research organizations to ensure they align with your values and spend money well. You can also check out recurring donations or volunteer as another way you can help.
Check Your Credit Report
A credit report is a picture of your financial health. You can check sites like AnnualCreditReport.com for a free report and scan for any errors or accounts you don’t recognize. You can catch mistakes early and that will save you a headache (and perhaps some money) later. If you notice anything wrong, report it immediately so that you don’t have to deal with issues when applying for loans or credit. This time, it is also used to check your credit score and strategize on how to fix it if needed.
Disclaimer: This list is solely the author’s opinion based on research and publicly available information.
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