Financial Checklist before the New Year

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So many things can happen in a year: New home, new job, marriage, divorce, death, adoption, etc. Taking time at the end of the year to make sure your finances are secure can ease the burden. The goal is to set you up for a more prosperous New Year.

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Below, we will discuss opportunities to improve your financial outlook in the coming year.

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Cash Flow Management

Income Analysis – This can be an easy activity if you have one job. If you work for an employer look at your paystub and analyze what was your total gross income versus what was your take-home pay. Even if you work for a major corporation, mistakes can still happen. Ensure your quoted salary is what you were paid.

If you own your own business or have multiple streams of income, create a pie chart of where your income is coming from. Plan to invest where your income is the most profitable. Compare this information to the prior years and calculate the growth rate. Then, estimate what your growth rate will be next year.

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Keep a Record of your Major Purchases – Make sure you track and keep receipts of all big-ticket items. This information can be used for tax preparation and forecasting future expenses. Imagine enjoying a vacation without dealing with debt when you return.

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Giving – Charitable donation to a qualified organization can significantly lower your tax liability. Seek a CPA to discuss how giving can reduce what you owe to the IRS.

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Investments

Review your Investment Mix – A lot of things can happen in a year as far as your investments. Take time to locate all of your most recent statements. Make a ballpark estimate of the value of your real estate holdings.  After tallying these investments up, you may find your investments are out of line with your risk tolerance. Make a plan to adjust your portfolio to an asset allocation that you are more comfortable with.

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Max out your Tax-Deferred Account – Confirm you are contributing up to your employer’s match. After you have contributed to your employer match, then make sure you have fully funded your ROTH IRA to the maximum allowed by the IRS given your situation. Finally, contribute the maximum amount to your 401(k).

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Required Minimum Distribution (RMD) – For those of us who are over 70 ½, you have to begin withdrawing from your various tax-deferred plans. This is how the IRS collects their money from all the tax-deferred revenue they gave you to prepare for your retirement. Please seek an accountant to withdraw the appropriate amount.

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Are you on track? – The end of the year is a perfect time to see if you are on track to reach your retirement goals. Look at your projections from last year. Are you closer, better, or worse? If you do not have any projections, this is the time for you to create some. Your projections should show you a direct path to the amount of wealth you want to amass before you retire.

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Other

Beneficiaries –  Ensure that you have the appropriate person/people listed as beneficiaries on your insurance, retirement accounts, and even checking/savings. Also, if you don’t have a will yet, that is a great goal for the next year.

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Review your Insurance Policies – If your family has expanded or you have a life event that changes your insurance needs, this is a good time to review your options for insurance. Unforeseen events can always happen, but those that are financially feasible to be insured should be.

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Review your Credit Report – With all of the credit breaches, this has to be standard protocol to protect your identity. The Federal Trade Commission estimates that 5% of credit reports have errors.  I highly recommend a Credit Freeze, which you can review my write-up on this subject CLICK HERE.

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Assess your Associations – Understand who the “A” players are in your life. Consider discontinuing to associate with people who try to get you down or reduce the impact of these individuals in your life.

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