As the end of the year approaches, it’s easy to get busy with the festivities. There’s the shopping you’ll need to do, family gatherings to attend, traveling, and so on.
However, it’s essential that you find time, amid these celebrations, to revisit your finances and create a plan for next year. Without a financial plan in place, it may be unclear the path you’ll need to take to reach your financial goals.
But that’s not where it ends. But with financial planning, you won’t only figure out where you want to go; you’ll also put together a strategy that will take you there. You’ll also be able to monitor your progress as time goes by to adjust for unexpected events.
In this post, you’ll learn what you need to take to finish the year strong and set yourself up for success in the next year.
1. Review your spending and draw up new budgets
An essential step to take when creating an end-of-the-year financial planning checklist is to evaluate your spending habits. Review how much you spent on necessaries, unplanned events, etc.
Did you make certain impulsive purchases? How much effect did those expenses have on your finances? How far did you fall from your budget?
These are some of the right questions to ask yourself when reviewing your expenses.
Besides making you see the actual state of things, reviewing your spending has a way of reminding you of your already set financial goals.
Once you’ve done this, you can draw up a new budget to help you track future expenses. But first, review your savings and debt payoff goals to develop a budget around these goals.
2. Review your savings and have better savings goals for the next year
Another question you need to ask is, “did you save as much as you should have?”
Did you meet your savings target? Were you inconsistent, or did you dip into your savings from time to time?
Whatever the case is, plan to end the year differently. First, ensure that you have your emergency fund stashed. At the very least, you should have three to six months of living expenses saved up.
Set up a monthly savings goal and then build it into your budget. You can equally set up automated savings to help you meet those goals.
3. Rebalance your Investments: What to change next year?
It’s essential to review your investments from time to time. Track which ones do well and those that aren’t. That way, you don’t keep investing in assets that don’t yield profit.
By going through your investments and rebalancing them, you’ll be able to realign your investments to fit into your original target or goal.
If you are looking to rebalance your investments, you should engage the services of a financial planning expert.
4. Evaluate your insurance goals
From time to time, re-evaluate your insurance plans.
In the year, you might discover that the things you’ve insured no longer need protection. But, on the other hand, there may also be new things to protect.
So, it’s good practice to review your insurance plan to ensure it still covers your needs.
5. Have better health plans for the new year
As the end of the year draws near, it is advisable to plan for the best health options you can enjoy. Make sure you choose one that covers the needs of your family as well.
If you contribute to a Health Savings Account (HSA), it’s time to review all your expenses and decide what to do with the reimbursements. If you do not need your HSA money to cover pressing medical expenses, you can leave the money in your account and allow it to grow tax-free.
On the other hand, if you maintain a Flexible Spending Account (FSA), check how much money you have left in your account. Put whatever’s in there to good use before the year runs out, or you end up losing it.
So, start thinking of your medical needs. For example, do you need a trip to the dentist? Or an eye checkup?
Depending on the FSA plan, you may be entitled to a grace period to use the FSA money even after the end of the year. Some might let you keep up to $500 for the new year.
You should find out if any of these options are available on the FSA plan you are on.
6. Maximize your 401k contribution
There’s a maximum amount you can contribute to your 401k account every year. As of 2021, that amount is $19,500.
The great thing about participating in a 401(k) plan is that many employers offer a great match based on your contribution. So, you want to take full advantage of that match before the year runs out.
For instance, if your company offers a 1:1 match, the company will match every $1 with an additional $1. So, if you contribute $2,000, they’ll match it with another $2,000, making your total contribution $4,000.
That’s a return of 100% in one year. So, if you haven’t reached the maximum amount, you can scrape together some money to pad it up.
7. Review your estate plans
You need to review your wills, trust, and other related documents as the need arises.
So if you had divorced within the year or had another addition to the family, you should adjust your will to factor these in.
8. Contact a financial planner
Contacting a financial planner should be at the very top of your year-end checklist. With the help of an expert, you can make the right decisions concerning your finances.
At the Art of Financial Planning, we are committed to helping you meet your financial goals.
