I’d like to believe that everyone understands the value in a year-end review of their personal finances. Statistics that I’ve seen indicate that over half of people who make resolutions indicate a change to household finances and saving money is a priority in the new year1. What is a bit of surprise to me is that so many put off (or neglect all together) actually reviewing their finances before year’s end. My conclusion: one of the biggest deterrents is the time it takes to get things organized.
When it comes to being successful with money, strong organization will empower you more than anything else you can do to take control of your finances moving forward. With my personal and professional understanding of the challenges of this process, I’ve put together an 8-step checklist to get your finances organized, take inventory of where you stand, and ultimately get you ready to close the books on 2019.
- Start with gathering your year-end statements and updating your balance sheet. It is an exciting thing to see your net worth growing over time, and to be able to celebrate the progress you’ve made!
- Review your current and future employee benefit elections. Ensure that you at least know where you stand with deductibles and out of pockets for the coming year. Specifically, understand how your benefit elections for the coming year will impact your savings necessity.
- Review the status of your contingency funds and emergency funds, replenishing as necessary. My rule of thumb for each:
- Contingency funds: have all of your applicable deductibles covered by immediate cash reserves.
- Emergency funds: depending on comfort levels, 3-6 months’ worth of expenses.
- Set realistic financial goals for the coming year and communicate openly with your spouse (or accountability partner) about how you are to accomplish them. Write these down and revisit them at least quarterly in the coming year.
- Review any goals set for 2019- If you were successful, how can you challenge yourself further in the coming year? If unsuccessful, what were the impeding factors?
- Consider the following areas when setting and prioritizing goals for 2020:
- Savings targets- Save until it hurts a little bit! Be aggressive with your budget to continue your momentum and then challenge yourself.
- Debt elimination- Prioritize punitive, high interest debt first, and then budget for paying down remaining balances.
- Charitable intentions- Decide how much and where you want to give to before the year starts, and then build these targets into your budget or cash reserves.
- Review your last paystub and investment account statement(s), then begin preparing for tax filing.
- Evaluate where you are from a withholding perspective (and/or with respect to quarterly estimated payments). Are you likely to be over- or under-paid and what alterations to your allowances or payments should you make?
- Evaluate where you stand with maximizing your retirement plan and HSA contributions (if applicable).
- Determine if you have any opportunities to mitigate your tax obligation (tax loss harvesting in your non-retirement investment accounts, for example).
- My colleagues, Julianne Andrews and Cathy Miller recently released great insight into year-end tax planning. Check those out:
Julie Andrews: 6 Tax Strategies to Consider Before End of the Year
Cathy Miller: 9 Year-End Tax Tips
- Use any year-end bonus money wisely and think ahead.
- Consider how much is necessary to:
- Replenish contingency and emergency funds
- Maximize your retirement plan deferrals for the current year
- Fund your charitable intentions established at the beginning of the year
- Fully fund your annual educational savings targets
- Prepare fully for your tax liability
- Consider working ahead for your budgetary sanity! (see below)
- Revisit your cashflow plan
- Review your spending patterns for the past year. What were your most problematic categories? Are they things you can control, and, if so, what can you do to adjust?
- Automate as much as possible when it comes to regular and reoccurring bills.
- Work towards budgeting a month ahead for cushion and flexibility. By doing so, you’ll have the cash already saved for the current month’s expenditures and you don’t have to worry over the timing of the automated payments.
- Review what and who is pouring into your financial life. Thoughts are powerful, so take note of what influences you on your views of money. Specifically, pay attention to how these influences might have impacted your spending/savings outcomes in the past year.
- What are you listening to, watching or reading when it comes to money management?
- Consider switching up your routines if necessary. My personal favorites right now are personal finance podcasts (like our brand new “FIT™ Perspectives” show) and Pinterest- there are a ton of great posts and graphics that may speak to you and your financial situation.
Starting fresh with new perspectives and ideas can be tough. The list above can certainly take some of that stress away come January 1. It may take a little time, but that time spent outweighs the reactionary pressure of the alternative. And, as always, leverage your advisor team here at Atlanta Financial to ensure 2020 is everything you hope for it to be!