Optimizing Your Finances: A Comprehensive Guide to Year-End Preparation
As the year draws to a close, it’s an excellent time to review your finances and prepare for the upcoming year. A thorough year-end financial review can help you assess your financial health, capitalize on potential tax savings, and set goals for the future. In this article, you’ll find a comprehensive year-end financial checklist to guide you in closing your fiscal year strong.
Review Your Budget
Begin by reviewing your budget. Check if you’ve stayed on track with your spending and saving goals. Identify any spending patterns that need adjustment and consider areas where you can cut costs or reallocate funds to better serve your financial goals in the upcoming year.
Maximize Retirement Contributions
If you have not yet maxed out your contributions to retirement accounts like a 401(k) or IRA, consider doing so to reduce your taxable income. Contributions to these accounts can often be made until the year’s end or even up to tax filing deadlines in the following year for certain accounts.
Assess Investment Portfolio
Evaluate your investment portfolio’s performance over the year. This involves checking if your investments are still aligned with your risk tolerance and long-term objectives. Consider rebalancing if any particular assets have drifted from their target allocation. This might also be a good time to harvest any capital losses to offset gains.
Utilize Flexible Spending Accounts (FSAs)
If you have a Flexible Spending Account (FSA), check the remaining balance. Many FSAs require you to use the funds by the end of the year or risk losing them, although some plans may offer a grace period or allow you to carry over a small amount into the next year.
Plan for Taxes
Gather and organize documents you’ll need for tax filing, such as receipts for deductible expenses and records of charitable donations. If you anticipate a high tax bill, consider making additional charitable donations or prepaying deductible expenses like mortgage interest or property taxes to increase your deductions.
Check Insurance Coverages
Year-end is a good time to review your insurance policies. This includes health, life, auto, and homeowners insurance. Make sure that coverage is adequate and that beneficiaries are up-to-date. It’s also worth shopping around to see if better rates are available, considering any life changes such as marriage, divorce, or children.
Set New Financial Goals
Reflect on your financial progress and set goals for the coming year. Whether it’s saving for a home, investing in education, or preparing for retirement, setting clear and achievable goals can help you stay focused and motivated. If you’ve struggled with goal-setting in the past, try the S.M.A.R.T. method.
Estate Planning Check
Review your estate plan, including your will, trusts, power of attorney, and health care directives. Make sure all documents are up to date and reflect your current wishes and family structure.
Prepare for Next Year’s Budget
Based on your current year review and anticipated expenses for the next year, prepare a new budget. Adjust for any expected changes in income, such as salary increases or changes in employment, and anticipated large expenses.
Secure Your Data
End the year by ensuring that your financial data is secure. This includes changing passwords for online banking and other financial services, and securing physical copies of important financial documents.
Are You Ready to Get Started with Your Year-End Financial Checklist?
Performing a year-end financial review is a proactive way to manage your finances and prepare for the future. By following this checklist, you can enter the new year with a clear understanding of your financial position and a solid plan for maintaining and improving your financial health. Each step helps to ensure that you’re on track to meet your financial objectives, making adjustments as necessary to adapt to both personal and economic changes.
If you’re interested in learning more about utilizing a year-end financial checklist, please contact our office today. At Hamilton Wealth Advisors, we help you navigate financial planning and decision-making through all phases of life. Schedule your free consultation with us today to learn more about our services!
