Dollars + December: Your End-Of-Year Checklist
You just hit “PTO” or taking things slow - er. December is the perfect time to hit pause, reflect, and set yourself up for a fresh financial start in the new year. While you’re excited for the new year to come, it’s key that we look at your personal book of business to see how your money shaped this year to position you better for the new year rushing in like a wrecking ball. Let's break this down in plain, real-talk terms. We're looking at your money habits, where you’ve crushed it, where you can do better, and how to get prepped for what’s next.
Behavioral Finance: Reflect And Reset
Let's be honest – our relationship with money goes way beyond just numbers. It's deeply intertwined with our emotions, habits, and even our past experiences. Understanding how our feelings and behaviors influence our financial decisions is crucial for long-term success.
For example, have you ever noticed yourself splurging when feeling stressed or down? This is a classic example of emotional spending. By recognizing these patterns, you can develop healthier coping mechanisms – like exercise, journaling, or spending time in nature – to manage those emotions and avoid impulsive spending.
Now, let's take a moment for some reflection:
What financial goals did you actually achieve? Did you finally set up that weekly money check-in? Pay off that nagging credit card debt? Buy your first home? Celebrate those wins, big or small! These victories build momentum and reinforce positive financial behaviors.
How has your money mindset evolved? Have you stopped dreading opening your bank statements? Do you feel less guilty about treating yourself occasionally? Are you starting to see money as a tool for achieving your goals instead of a constant source of stress? These shifts in perspective are crucial for building a healthy relationship with money.
How has your income changed this year? Did you secure a raise? Land a successful side hustle? Discover new income streams? Acknowledge these achievements! Recognizing your progress can fuel your motivation and inspire you to continue striving for financial growth.
What were your biggest financial wins this year? Did you pay off a significant debt? Hit a major savings milestone? Reflect on these standout moments and what they mean for your overall financial journey.
Do your financial decisions align with your values? Are you spending your money in ways that truly reflect what's important to you? Prioritizing experiences like travel and education over impulse purchases is a great example of value-driven spending.
What positive financial habits have you cultivated? Did you consistently stick to your budget? Start meal prepping to reduce dining out expenses. Every small step, no matter how insignificant it may seem, contributes to your overall financial well-being.
By taking the time for honest reflection and recognizing your progress, you can build a stronger foundation for your financial future.
Identify Areas To Improve
Let's be honest – nobody's perfect when it comes to personal finance. There's always room for growth and improvement.
Ask yourself these critical questions:
Are you overspending in certain areas? Let's be real, that takeout habit might be costing you more than you realize.
Is your savings plan consistent? Could you automate more of your savings to make it effortless?
Is your budget actually working for you? Is it realistic, flexible, and helping you achieve your financial goals?
When did money stress you out this year? What triggered those feelings of anxiety? How can you avoid those triggers in the future?
By honestly assessing your spending habits, identifying areas for improvement, and understanding the emotional factors that influence your financial decisions, you can create a more solid financial foundation for the year ahead. Q4 is legit your free trial for the year coming in! I talked about this over on YouTube!
Let’s get into a checklist of things you can do before you eat those grapes under the table or eat those collard greens! :)
Audit Your Wallet & Accounts
Remember that "Audit Your Wallet" mantra I've been preaching all year long? Well, it's time for the annual deep dive!
Grab your bank and credit card statements, or open that budgeting app you've been meaning to check.
What are you paying for but not using? Cancel those subscriptions or memberships that are collecting dust.
Are there unnecessary fees eating into your hard-earned cash? Look for sneaky bank fees or high credit card APRs. Consider switching to no-fee accounts if possible.
What's your actual savings rate? Are you putting enough aside each month? If your current savings account isn't earning much, explore HYSAs.
Are your accounts helping you achieve your financial goals? Double-check that your checking and savings accounts are aligned with your overall financial plan.
Fund Tip: Use any "found money" from canceled subscriptions or reduced fees to boost your savings or knock out some debt.
For a more detailed guide on auditing your wallet and accounts, check out this YouTube video.
Negotiate Your Bills
After we've scrutinized your spending, let's tackle those pesky bills. When was the last time you negotiated your bills? Don't leave money on the table!
Contact your service providers: Call your internet, cable, insurance, and utility companies and inquire about promotions, loyalty discounts, or potential cost reductions.
Shop around for better deals: Don't be afraid to compare prices from other providers.
Fund Tip: Regularly check for automatic renewals on services you no longer use. Those forgotten subscriptions can quickly add up! What you ‘save’ use towards your other money goals - saving in that HYSA, paying extra towards debt, investing in an ETF/Index Fund, etc.
This blog post provides some helpful scripts you can use when negotiating with different service providers.
Review Your Financial Goals
So, how did this year's financial "goal" post pan out? Seriously though, understanding how your financial goals played out this year is crucial for setting yourself up for success in the coming year. Think of it like a sports team reviewing game footage – even the champions analyze what went right and what needs improvement.
Let's take a moment to honestly assess your progress:
What's Working? Let's celebrate those wins! Did you finally max out your retirement contributions? Successfully pay off a credit card? Consistently cook at home instead of eating out? No matter how small, acknowledge and appreciate your accomplishments.
What Needs Tweaking? Be honest with yourself. Did that ambitious travel fund fall short? Are you still carrying that lingering debt? Is your emergency fund looking a little thin? Identify areas where you can improve and make adjustments.
What's Next? Now, let's plan for the future! Choose 1-3 realistic financial goals for the new year. Don't overwhelm yourself with a mile-long to-do list. Instead, focus on a few key objectives that will make a significant impact on your overall financial well-being.
Fund Tip: Break down your larger goals into smaller, more manageable steps. Think of it like training for a marathon – you don't start by running 26 miles on day one. You gradually increase your distance and intensity over time. The same principle applies to your finances. Start with small, achievable actions, and gradually build momentum towards your ultimate goals.
Retirement + Investment Check-In
This might be the section some of you dread, but trust me, your future self will thank you for taking the time to review your retirement and investment accounts.
Here's what to review:
Are you contributing enough?
Take full advantage of your employer match – it's essentially free money!
Aim to contribute as much as possible to your retirement accounts, ideally 10-15% of your income. If you can't reach that goal immediately, start small and gradually increase your contribution rate over time. For example, increase your contribution by 1% every quarter or twice a year.
How are your funds performing?
Regularly review the performance of your investments.
Rebalance your portfolio as needed to ensure it aligns with your risk tolerance and long-term financial goals.
For Parents:
Consider contributing to your children's custodial accounts or 529 college savings plans.
Establish a consistent contribution schedule, such as contributing a portion of your tax refund or making contributions on birthdays or other special occasions.
Other Investments:
If you've maxed out your contributions, ensure those funds are actively invested and not simply sitting idle in cash.
Understand your "cash + carry" ratio for your HSA and IRA funds. This refers to the balance of cash versus invested assets within your account.
Optimize Your Investments
Make sure your money is working as hard as you are. Before the year ends, check on your investment accounts:
Maximize your 401(k) contributions to take full advantage of employer matches.
Ensure your IRA is fully funded if you’re eligible. Also, keep in mind that you can contribute towards for the current year up until you file your taxes the previous year.
Revisit your HYSA to confirm it’s earning competitive interest rates. And be mindful of the 1099 that will come on the interest you were paid.
Even small tweaks can lead to significant long-term gains. Use this time to align your investments with your financial goals.
For those with HSAs, maxing out contributions not only lowers your taxable income but also allows for long-term growth if you invest the funds. It’s a win-win for your health and your wallet.
Fund Tip: Don't forget to review and update the beneficiaries on your retirement and investment accounts, especially if you've experienced any significant life changes this year.
By taking the time to review your retirement and investment accounts, you can ensure you're on track to achieve your long-term financial goals and build a secure financial future.
Check Your Estate Plan + Beneficiaries
One of the most overlooked areas of financial planning is often our estate plan and beneficiary designations. Been talking about this for a while, especially after my personal experience with my Dad’s estate. Imagine this: you've worked hard all your life, built a solid financial foundation, and then… you unexpectedly transition. But what happens to your hard-earned assets? If your beneficiary designations are outdated or incomplete, it can create significant headaches for your loved ones and potentially lead to unintended consequences.
Do you even have life insurance outside of your job? You should. Even if you have a term policy, it will help your family/friends tackle your finances before and after your funeral.
I've covered the basics of life insurance in this previous post.
I recommend reviewing your beneficiary designations at least annually or whenever you experience a major life event, such as:
Getting married or divorced
Having a child
Experiencing a significant change in your financial situation
Take 10 minutes to update your beneficiaries:
Retirement accounts (401(k), IRA): Ensure these valuable assets go to the intended recipients.
Life insurance policies: Make sure your beneficiaries reflect your current family and financial situation.
Payable-on-death (POD) and transfer-on-death (TOD) accounts: This includes bank accounts, investment accounts, and other assets.
Fund Tip: Keeping these designations current saves your loved ones a significant amount of time, stress, and potential legal fees in the long run.
Estate Planning 101:
For a deeper dive into estate planning, check out these helpful resources:
By taking the time to review and update your estate plan and beneficiaries, you can provide peace of mind for yourself and ensure your hard-earned assets are distributed according to your wishes.
Revisit Your Budget
We all know the drill: create a budget, stick to it, and watch your finances flourish. But have you taken the time to truly revisit your budget at the end of the year? Need to get started with budgeting? This blog post is gold!
This annual review is more than just a side eye glance. It's an opportunity to analyze your spending habits, identify areas for improvement, and fine-tune your budgeting strategy for the year ahead.
Ask yourself these key questions:
How did your spending stack up this year? Did you consistently stay within your budget? Were there any unexpected expenses that threw you off track?
Did you notice any seasonal spending spikes? Are there certain months where your expenses tend to be higher (think holidays, birthdays, summer travel)?
Did your budget baseline work for you or against you? Was it too restrictive, too lenient, or simply ineffective?
Where can you improve? Factor in anticipated cost increases for essentials like groceries, utilities, and transportation.
Can you automate? Schedule automatic transfers to your savings and emergency fund accounts. Consider setting up sinking funds for predictable expenses like holiday gifts, car repairs, and property taxes.
Fund Tip: Sinking funds are your secret weapon against unexpected expenses. Start now! Set aside a little each month for those inevitable holiday costs, birthday gifts, and annual bills. Future you will thank you for your foresight.
For high-yield savings accounts (HYSAs), I'm a big fan of Ally and Marcus. If you need more insight about HYSAs, here’s a guide for you.
By taking the time to review your budget at the end of each year, you'll gain valuable insights into your spending habits and make adjustments that will significantly improve your financial health in the long run.
Review Your Spending
Take a moment to review where your money went this year. Check your bank and credit card statements to see if your budget matched your actual spending habits. Identifying areas where you spent the most—whether it’s at Target, Amazon, or your favorite coffee shop—can reveal patterns and help you plan better.
If you find consistent overspending in certain categories, consider a “No Spend” or “Low Spend” challenge. These challenges can help you reset your habits, understand your cash flow, and make adjustments for the new year. Your future self will thank you for addressing these financial potholes now.
Pay Down High-Interest Debt
Before we dive headfirst into another year, let's get real about our debt. It's time to move beyond just making minimum payments and develop a real plan to conquer that debt.
Think back to when I was paying off my car loan. I didn't just blindly make payments. I wanted to know the big picture:
How much was I paying each month?
How long would it take to pay off the entire loan?
Knowing these numbers motivated me to find ways to accelerate the process. I even started picking up extra gigs and dedicated those earnings directly toward the principal of my loan. Before you take that 0% APR card, check this out.
Let's tackle that debt with a plan:
Snowball Method: This approach focuses on paying off the smallest debts first, regardless of interest rate. The psychological boost of quickly eliminating those smaller balances can provide powerful motivation.
Avalanche Method: This strategy targets debts with the highest interest rates first, ultimately saving you the most money in the long run.
Fund Tip: Leverage any savings you've uncovered through budget audits or negotiations to fuel your debt-crushing efforts.
A word of caution: Be wary of debt relief programs. Some of these programs can severely damage your credit score and may not actually be in your best interest. If you're considering a hardship program, carefully review the terms and conditions to understand the potential impact on your credit and overall financial health.
By developing a strategic plan and taking proactive steps to reduce your debt burden, you'll be well on your way to a more financially secure future.
Get Ahead Of Tax Season: Tax Planning
Tax season is just around the corner! Instead of scrambling at the last minute, let's get organized and proactive.
After you get that last check stub and even think about filing, make sure you have all your ducks in a row:
Gather your essential documents: This includes your W-2s, 1099s, and any receipts for eligible deductions.
Maximize tax-advantaged accounts: Contribute as much as possible to your 401(k), IRA, and Health Savings Account (HSA) to reduce your taxable income.
Review your withholding: Adjust your withholding allowances to ensure you're not overpaying or underpaying throughout the year.
Fund Tip: For freelancers, gig workers, and creators, tax season can be a particularly challenging time. Start setting aside a portion of your earnings in a dedicated sinking fund to cover your estimated tax payments.
Fund Tip: Don't wait until the last minute to make your estimated tax payments. Consider setting up automatic transfers into your HYSA or even pre-paying your estimated taxes throughout the year to avoid any penalties or interest charges.
Also, if you’re getting cash back - make a plan for it. Here’s a good post about that!
If you find yourself facing a significant tax debt, don't hesitate to explore options like an offer-in-compromise. I've been there, and it can be a viable solution in certain situations.
By taking these proactive steps, you can significantly reduce the stress and hassle associated with tax season and ensure you're in the best possible position to minimize your tax liability.
For Parents: Start Or Refocus Your Kids' Financial Planning
You know the saying I have - you’re your child’s first financial planner. It's never too early to start teaching your children about money. Think of it as an invaluable life skill that will benefit them for years to come.
Let's start with some key steps:
Define Financial Goals: What are your kids' aspirations? Is it a new gaming console, a summer camp, or saving up for college? Help them set clear, achievable financial goals. While we focus on your kids, don’t forget to focus on your goals. Find balance in it all.
Embrace The Power Of Savings: Encourage your kids to save for those big-ticket items. A high-yield savings account (HYSA) is a great tool to help their money grow faster.
Plan For The Future: Start or contribute to a 529 plan to help fund your child's future education expenses.
Lead By Example: Your own financial habits and mannerisms are powerful teaching tools. Let your children see you budgeting, saving, and investing.
By incorporating these strategies, you can equip your children with the knowledge and skills they need to make sound financial decisions throughout their lives.
Before You Forget: These Key Accounts
1. Maximize Your Tax-Advantaged Accounts
Contribute To Retirement Accounts: Take full advantage of employer matches in your 401(k) plan. Contribute as much as possible to your retirement accounts, aiming for 10-15% of your income.
HSA Contributions: If you have an HSA, make sure you're maximizing your contributions. Remember that you can often contribute to your HSA up until the tax-filing deadline of the following year. Spend, Invest, Save - the motto with these accounts.
Education Savings: Contribute regularly to 529 plans to help fund your children's future education expenses.
2. HSA/FSA: Don't Let Those Dollars Go To Waste
FSA Funds: Don't forget to use your Flexible Spending Account (FSA) funds before the end of the plan year.
Types Of FSAs: There are three main types: healthcare FSA, limited-purpose FSA, and dependent care FSA.
Spending Deadlines: Most FSAs have a deadline for using funds, typically the end of the plan year. Some employers offer a grace period or allow a limited rollover.
3. Roth Conversions: Consider Your Options
Roth Conversions: If you're considering converting traditional IRA assets to a Roth IRA, consult with a financial advisor to determine if it's the right strategy for your situation.
4. Charitable Giving: Maximize Your Tax Deductions
Itemized Deductions: If you itemize deductions, you can potentially deduct charitable donations to qualified organizations.
Contribution Limits: Contribution limits may vary, so consult with a tax professional for the most up-to-date information.
Donation Strategies: Consider strategies like "bunching" donations to maximize your deductions in a single year.
5. Required Minimum Distributions (RMDs): Stay Informed
RMDs: If you're 73 or older, you are required to take minimum distributions from your qualified retirement plans.
RMD Deadlines: The deadline for taking your Required Minimum Distribution (RMD) will vary depending on your specific circumstances.
Penalty for Missing RMDs: Missing RMD deadlines can result in significant penalties.
6. Tax-Loss Harvesting: Offset Capital Gains
Tax-Loss Harvesting Strategy: Selling investments at a loss, replacing them with similar investments, and using those losses to offset capital gains.
Benefits: Reduces your tax liability and allows more of your money to stay invested.
Timing: Consult with a financial advisor to determine the optimal time to harvest tax losses.
By taking these key actions throughout the year, you can optimize your tax situation, maximize your savings, and ensure you're on track to achieve your long-term financial goals.
Set Yourself Up For Success Next Year
This isn't just about saving a few bucks now – it's about building lasting financial habits that will empower you for years to come.
Here's how to get started:
Automate Your Savings: Make it effortless by setting up automatic transfers to your savings and investment accounts.
Negotiate Better Deals: Don't be afraid to negotiate lower rates on your insurance, internet, and other services.
Spend Intentionally: Be mindful of your spending and make conscious choices that align with your financial goals. Finding your balance is what’s going to keep your balance in accounts and accountability. You can buy the things you love, in moderation while building your savings/investing, etc. This is money management which is the anchor of financial planning.
Before you close the book on this year, take some time to reflect on your progress and restructure your financial goals for the year ahead.
These small, consistent steps can lead to significant financial gains over time.
Need help setting financial goals or creating a personalized plan? Check out my services or sign up for the newsletter!
Let's make this upcoming year your best financial year yet!