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10 Items for Your End-of-Year Financial Checklist

Money Management | Ben Luthi | November 4, 2020

By Ben Luthi

Ben Luthi has been a freelance writer since 2013, covering all things money and travel. His work has appeared in many major publications and financial websites, including U.S. News & World Report, The New York Times, Fox Business, Experian, FICO and more. Ben lives in Utah with his two kids, and loves spending his free time traveling, hiking and talking about credit cards.

 

The end of the year is a good time to take stock of your goals and prepare your financial checklist for the coming months. As life slows down a little bit during the holidays, here are 10 things you can do to evaluate your financial situation and set yourself up for success in the future.


1. Review Your Goals From the Past Year

If you set some financial goals for the current year, walk through each of them and figure out where you stand. Depending on your ambition when you set your goals and the circumstances of the year, you may have crushed some goals and fallen short on others.

If you missed the mark on some, though, it’s important to perform this first step from a place of non-judgment. Life rarely turns out exactly how we plan, and if you didn’t manage to check off all your goals in the past 12 months, you’ll still have a chance to do so in the future.

 

2. Check Your Credit Score and Report

Your credit score is an important indicator of your credit history’s health. A good or excellent credit score — typically a FICO score of 670 or above — can help you obtain affordable credit, save on auto and homeowners insurance, and even improve your chances of getting a job or lease on an apartment or home.

You can check your FICO score for free through Experian. In some cases, your bank, credit union or credit card company may offer you complimentary access to your score as a customer benefit. 

To get a free copy of your credit report, visit AnnualCreditReport.com. Normally, you can get a free copy of your report from each of the three credit bureaus once every 12 months. However, you can review each report for free on a weekly basis through April 2021.

If your credit score isn’t in great shape, your report will tell you the areas where you could use some improvement. You can use your credit report to help set your goals for the coming year.

 

3. Review Your Debt Repayment Plan 

If you have debt, take some time to review your balances and monthly payments. If you’d planned to pay off your debts early, evaluate your plan and whether you need to make any adjustments.

In general, it’s best to focus first on debts with higher interest rates, such as credit cards and personal loans. Because student loans can make up a large portion of the average household debt burden, it may make sense to prioritize them, as well. 

Also, consider potential ways to save money on your debts going forward. For example, you may be able to refinance a student loan, car loan, or mortgage. If you have credit card debt, you may qualify for a balance transfer credit card, which can come with an introductory 0% APR promotion to help you pay down your balance interest-free.

 

4. Take a Look at Your Savings

Paying down debt is an important element of any financial plan, but it’s also crucial to maintain robust savings. After all, if you make large debt payments every month, you’ll need an alternative source of savings for unexpected expenses, like car or home repairs.

In general, financial experts recommend keeping three to six months’ worth of basic expenses in an emergency fund. Also, consider other savings goals, such as a home down payment or vacation fund, to make sure you can continue to meet your financial benchmarks.

 

5. Check on Your Retirement Accounts

Depending on your age, retirement may still be decades in the future or on the horizon. Either way, take stock of your retirement savings in your 401(k), individual retirement account (IRA), or other retirement savings accounts. 

Once you know how much you have saved, as well as your future contributions, use an online retirement calculator (or work with a financial advisor) to see if you’re on track to retire when you want. If you need to make some changes to your retirement savings rate, check your budget to see if that’s feasible. 

At the very least, if you have a 401(k) plan with an employer contribution match, make sure you’re contributing enough to max out that benefit. Also, check to see if you can afford to max out your contributions based on the limits provided by the IRS — these can vary by account, so check with a tax advisor or the IRS website for more information.

 

6. Revisit Your Tax Withholding

The average tax refund in 2020 was $2,476, according to the IRS. While it can be nice to enjoy a small windfall every year during tax season, you have the option to keep your money throughout the year instead of giving the IRS an interest-free loan.

To do this, speak with your payroll manager at work to see if you can adjust the amount that’s withheld from your paychecks. Over 12 months, a $2,476 refund would mean an extra $206 every month in take-home pay, which you could put toward your financial goals. 

 

7. Use Up Your Flexible Spending Account Funds

If you have a Flexible Spending Account (FSA) — and employer-sponsored health savings plan — you’re required to use all of the funds in your account during the plan year. In some cases, employers may allow you to keep some funds for the next year or may give you a grace period to use the remaining funds.

However, the best way to make sure you don’t lose the money that you’ve contributed throughout the year is to spend it on eligible medical expenses. Visit the FSA Store to find approved items, or consider prepaying some healthcare expenses to avoid leaving money on the table.

Note that if you have a Health Savings Account (HSA), this isn’t necessary because there’s no use-it-or-lose-it provision.

 

8. Review Your Will

Even if you don’t have significant assets to leave to your loved ones, it’s still a good idea to have at least a basic will in place. If you have kids, for instance, you can designate someone to take care of them after you’re gone. You can also include medical directives, appointing someone to make healthcare-related decisions if you’re incapacitated.

Your will also determines what else you want to happen when you pass away. It may not seem like an exciting subject, but it’s important to protect your and your loved ones’ interests if something happens to you.

 

9. Look for Ways to Maximize Your Tax Refund

While the goal is to minimize your tax refund through withholdings from your paycheck, it’s also important to find other ways to reduce how much you owe in taxes every year.

Some of the things you can do to maximize your tax refund include:

  • Make charitable contributions
  • Make January’s mortgage payment in December to increase your mortgage interest deduction
  • Sell off investments that have sustained losses to offset gains and other income
  • Contribute to a Health Savings Account, up to the annual maximum for your health plan and 
  • Work with a tax advisor, who can provide more advice about how you can save money

One thing to keep in mind is that making charitable contributions and an additional mortgage payment only helps you if you plan to itemize your deductions. If you’re going to take the standard deduction, you won’t be able to take credit for those.

 

10. Set Specific Goals and Plans for Next Year

 

Now that you have a solid understanding of your financial situation, take some time to set concrete goals for the coming year. Then, make actionable plans to reach those goals. 

This process can be challenging because it requires you to make some assumptions about what’s going to happen in the current year. Try to set a few stretch goals, but avoid dreaming too big because it could make it easier to get discouraged and give up. Be honest with yourself without selling yourself short.

Also, plan to review your goals on a quarterly basis in the upcoming year. This will enable you to make adjustments as needed to stay on track. 

 

The Bottom Line

Whether or not you’ve spent much time on your financial plan in the past, it’s never too late to start. This process can be time-consuming, especially if you’re not familiar with the process. If you need to, do some online research to educate yourself about how to proceed and achieve your goals.

While running through this end-of-year financial checklist doesn’t guarantee success in the upcoming year, it will increase your chances of making solid progress toward your goals.


Note: Links to other websites or references to services or applications are provided as a convenience only. A link does not imply SouthEast Bank’s sponsorship or approval of any other site, service or application. SouthEast Bank does not control the content of these sites, services or applications.

Information contained in this blog is for educational and informational purposes only. Nothing contained in this blog should be construed as legal or tax advice. An attorney or tax advisor should be consulted for advice on specific issues.
 

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