Starting the new year off on the right financial track is a wonderful feeling. But to get there, you’ll need to put aside a little time to wrap up the current year and start preparing for the next. Here’s a checklist of ten items you should review as the year comes to an end. Some moves are time-sensitive – so you’ll want to get started soon.
#1: Max Out Retirement Contributions
While the holidays are an expensive time of the year, you don’t want to miss out on substantial tax savings. Review your contributions to your tax-advantaged accounts so far this year, including 401(k)s, IRAs, and HSAs. If you have room and the funds available, try to maximize your contributions.
If your employer offers matching 401(k) contributions up to a certain amount or percentage, do your best to reach this threshold. This is essentially free money from your employer that you don’t want to leave on the table.
#2: Review Your Insurance Policies
The end of the year is the perfect time to review your auto and homeowner’s insurance policies. While insurance companies are famous for their commercials claiming they can save you money, it’s not always so clear-cut.
It’s wise to obtain quotes from several insurance providers. Then, make sure you’re comparing apples to apples. One quote might be cheaper, but are you sacrificing coverage for that savings? Try to get quotes with similar coverage – then make your decision.
#3: Adjust Your Investments
The stock market is always a roller coaster, and depending on your projected retirement date, you might want to adjust your investment strategy. If retirement is right around the corner, you should consider switching to more conservative investments. If your retirement date is decades away, you might choose to diversify more and increase your risk tolerance.
Either way, it’s wise to schedule a time to review your investment portfolio with your financial advisor. They might also have suggestions on year-end tax strategies.
#4: Double Check Your Beneficiaries
Should you unexpectedly pass away, your beneficiaries will be granted access to your financial accounts. Having beneficiaries can also speed up the probate process. So, it’s vital to review and update the beneficiaries on all your financial accounts – including credit union and bank accounts, investments, and life insurance policies.
#5: Update Your Will
A lot can happen in a year, so it’s wise to review your will annually. Perhaps you were recently married or welcomed a new baby into your family. You want to take a moment to review your will and make any necessary adjustments.
If you recently started a family, you might also want to take this time to open a life insurance policy to ensure they are taken care of should something ever happen to you.
#6: Check Your Credit Report & Score
While there are many websites and apps that allow you to check your credit score for free, it’s also wise to review your entire credit report. You can obtain a free copy of your credit report annually from each of the three major credit bureaus (Experian, Equifax, and TransUnion) at www.AnnualCreditReport.com.
Take some time to review your credit report for any inaccuracies or fraud. Then, take note of your credit score. If you plan to take out a loan in the coming year, such as a car loan, mortgage, or new credit card to consolidate debt, it’s wise to create a plan to improve your score before then. Doing so will help increase your chances of being approved and decrease how much you pay in interest.
#7: Review Your Current Loans & Interest Rates
Loan payments, such as car loans, mortgages, credit cards, and student loans, generally make up your largest monthly expenses. They also provide the greatest opportunity to save money. As you move into the new year, you’ll want to trim your costs as much as possible. Refinancing your loans is a great place to start.
First, make a list of all your outstanding loans and their current interest rates. Then, schedule a time to meet with a loan officer at the credit union. They’ll be able to help you identify any loans you can refinance or consolidate at lower interest rates.
#8: Set Financial Goals
Before the new year begins, it’s wise to sit down and map out where you’re going, financially speaking. What do you hope to accomplish in the next year? In the next five years?
Short-term goals might include reducing credit card debt or buying a new car. Five years down the road, purchasing a new home or getting married may be on your list. Write down what you plan to achieve in the coming years and craft a strategy to get there.
Note: Setting reminders for yourself are a great way to stay motivated. You might include sticky notes on your bathroom mirror, refrigerator, or in your wallet. Your phone’s lock screen is a great place to list your fiscal goals as well.
#9: Create a Budget
BUDGET – the dreaded six-letter word. While many consider creating and maintaining a budget burdensome, it’s the best way to keep your finances organized.
Many people will simply update the previous year’s records when crafting a budget. But it’s wise to start from scratch – this will help you cut out any unnecessary expenses, such as subscriptions you no longer use or value.
There are three things to keep in mind when creating a budget:
- Keep it simple. The more complex you make it, the harder it becomes to follow and balance monthly.
- Don’t be unrealistic. You don’t want to sabotage yourself before you even begin by creating a budget that’s too strict.
- Pay yourself first. Make sure you’re actively putting money into your savings account. It’s better to treat your savings as you would any other monthly bill. If you wait and put any leftover funds into your savings monthly, you’ll often find there is very little left.
#10: Focus on Your Emergency Fund
Your emergency fund is money you put aside for unexpected expenses. Common uses for this money include car repairs, home repairs, or medical expenses. However, over the past decade, emergency funds have become even more crucial – centering around potential job losses.
From the Great Recession to the pandemic, people realized their jobs are not always secure. That’s why your emergency fund is so important. You should work to build an emergency fund equal to roughly three to six months of your living expenses. That way, if you find yourself unemployed or have fewer hours at work, you’ll be able to meet your financial obligations while looking for a new job.
We’re Here to Help!
While the month of December is among the busiest, there’s no better feeling than being fiscally prepared to take on the new year. Spending time wrapping up the current year and preparing for the next is wise and will provide peace of mind when the bell strikes 12 on New Year’s Eve.
If you’re interested in refinancing loans, updating your beneficiaries, or opening a savings account for your emergency fund, we’re ready to help. Please stop by any of our convenient branch locations or call 888-777-9982 to schedule an appointment with a team member today.
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