Year-End Money Checklist: Secure Your Financial Future
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As the year comes to a close, it's essential to take a moment to evaluate your financial health and plan for the future. This year-end money checklist will guide you through critical financial areas to ensure you start the new year on the right financial footing.
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1. Money Automation:
Review your savings, bill payments, debt payments, and investments to ensure they align with your financial goals and automate where possible to make managing your money easier.
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2. Cut Costs:
- Housing: Aim to keep housing costs between 20% and 30% of your income, or even lower if you're pursuing financial independence (FIRE).
- Food: Budget around 15% of your income for food expenses.
- Transportation: Allocate no more than 20% of your income to transportation or be more aggressive if you're pursuing FIRE.
- Check Subscriptions: Review and cancel any subscriptions or services you no longer use or need.
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3. Negotiate Bills:
Contact service providers to negotiate bills, potentially saving you money on various monthly expenses.
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4. Evaluate Your Spending:
Assess your spending to determine if each expense brings value to your life. If not, consider cutting it out.
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5. Net Worth Statement:
Use tools like empower to track your net worth, ensuring your assets are growing, and your liabilities are decreasing.
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6. Give to Charity:
Take advantage of charitable contributions to lower your tax bill while supporting causes you care about.
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7. Annual Gift Tax Exclusion:
Utilize the annual gift tax exclusion to give tax-free gifts of up to $16,000 per person.
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8. Fund a 529 Education Savings Account:
Contribute to a 529 plan to save for educational expenses and check for state tax breaks.
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9. Fund a Health Savings Account (HSA):
Maximize HSA contributions for potential tax savings.
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10. Retirement Planning:
Review and maximize contributions to retirement accounts such as a 401(k) or IRA.
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11. Check Tax Withholding:
Adjust tax withholding to avoid underpayment penalties, especially if you have additional income.
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12. Tax Loss Harvesting:
Offset capital gains with capital losses in your taxable investment accounts.
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13. Consider Roth IRA Conversions:
Evaluate the benefits of Roth IRA conversions for tax-free growth.
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14. Flexible Spending Account (FSA):
Check your healthcare FSA balance and contribution limits for any changes.
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15. Estate Planning:
Review and update your estate planning documents to reflect your current wishes.
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16. Financial Document Organization:
Organize and securely store important financial documents for easy access.
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17. Financial Goals:
Set specific financial goals for the coming year, such as paying off debt or increasing retirement contributions.
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18. Review Insurance Coverage:
Ensure your insurance policies provide adequate coverage for your needs.
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19. Emergency Fund:
Reassess and adjust your emergency fund to cover at least six months' worth of living expenses.
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20. Tax Planning:
Consult with a CPA to stay informed about tax law changes and maximize available deductions.
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21. Rebalance Your Portfolio:
If you're an investor, rebalance your portfolio to align with your financial goals and risk tolerance.
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22. Take Required Minimum Distributions (RMDs):
If you're 72 or older, don't forget to take your required minimum distributions from retirement accounts to avoid penalties.
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23. Plan for Windfalls:
If you expect year-end bonuses or tax refunds, have a plan for how you'll allocate the extra funds.
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24. Cybersecurity Check:
Ensure your online security by freezing credit, removing personal information, and implementing a robust password system.
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