Thanksgiving and Black Friday are behind you. Your favorite coffee shops and downtown streets are decked in red ribbons and white lights, and the airwaves are filled with classic holiday tunes. There’s a chill in the air. As we approach the Christmas and New Year holidays, it’s a time to reflect on the year past and prepare for the year ahead.
As 2022 approaches, it’s time to review the year’s financial progress (or setbacks) and take care of any remaining financial tasks. To help you review this year’s finances, we’ve created a simple End-of-Year Financial Checklist so you can prepare for 2022 with confidence – even in the midst of the holiday bustle.
✅ Review Your Budget
Budgeting isn’t just for young people or those with a limited income. Reviewing your budget at least monthly will help keep you fully aware of your financial situation and how your family spends money. The greatest benefit of budgeting is that it can reveal easy areas to cut back your monthly expenses so you can reallocate money into categories that hold more value.
And remember that as a family, communication is key. Try to find a time when your family can sit down together and create, review, or adjust your monthly budget. Budgeting as a family (even if it’s just you and your spouse) means that it will be easier to reach your household financial goals. When everyone is on board, everyone is more aware of the financial decisions they’re making that impact the entire family.
At the end of the year, it can be a useful exercise to review your budget for the entire year. How did your net worth change over the course of 2021? Did you experience any unanticipated large expenses that threw your family for a financial loop? Or perhaps you or your spouse received a promotion or took a higher-paying job this year. Whatever happened this year can provide valuable information for setting your goals for the next year.
✅ Review Your Progress With Debt Repayment
No two families’ debt situations are exactly alike. Maybe you’ve got more credit card debt than you’d like at this point in your life. Or maybe you’re actually close to finally being done with those student loans. Whatever your situation may be, every family should review their debt progress (or lack thereof) at the end of the year.
Gather all your debt information in one place and review it with your spouse. Decide together what needs to be paid off first. You may want to tackle your credit card debt first (or whatever debt has the highest interest rate). The sooner you can lower your high-interest debt, the more money you’ll save in the long run.
The end of the year is the perfect time to reflect on any strides you made towards debt repayment in 2021. And if your family hit some hard times and took on more debt, it’s still the perfect time to create a strategy to minimize your debt for the coming year.
✅ Review Your Progress With Savings
Now let’s take a look at the other end of the spectrum: savings. A basic place to start is to review your savings gains during the last year. What do your savings accounts look like now compared to December 2020? And how do you want them to look in December 2022?
Reviewing your savings progress (or your lack of progress, in some cases) can be motivating. You’ll have a more informed idea of how you can develop realistic goals for the next year. Create a plan that can help you achieve next year’s savings goals for retirement, the kids’ college fund, and other savings accounts. Consider how much you can set aside per month for each savings goal.
If you are planning to retire in the near future, then you’ll want to address the current elephant in the room: inflation. When you’re approaching retirement age, inflation can become more of an acute worry, since you may soon be on a more limited income. Talk with your financial advisor to see how different near-future inflation scenarios will affect your retirement funds and what strategies you may be able to use to overcome the challenges of inflation.
✅ Make A Plan to Reduce Your Tax Burden
The end of the year is the best time to engage in tax planning because it gives you enough time to implement strategies before tax day in April. You may be able to increase contributions to tax-deferred retirement accounts or health savings accounts to lower your taxable income for the year. You may also be able to deduct medical expenses or private health insurance premiums to reduce your tax liability.
Additionally, ask your financial advisor or accountant about itemized deductions. Are they right for your situation, or does the standard deduction make itemized deductions a no-go? It’s tricky for non-experts to know the best strategies for reducing taxable income or offsetting capital gains, so ask the professionals sooner rather than later.
✅ Review Your Investment Portfolio
A final item you may want to add to your end-of-year financial checklist is to conduct a thorough review of your portfolio. Depending on when you complete annual portfolio reviews, the end of the year can be a good time to review your portfolio performance and asset allocation.
Although you may not make changes right away, the knowledge you gain from doing other end-of-year financial reviews can help inform the goals or strategies you’d like to discuss with your financial advisor regarding your investment portfolio.
Review Your Finances Thoroughly with Caviness Wealth Management
The end of the year is a great time to reflect on what has been working well, what hasn’t, and how you can resolve to grow or change next year. The key takeaway here is that you aren’t alone. Your family is a team, and when it comes to finances, open family communication is key. Talk to each other about money. Talk to the experts, too. They’re here to help.
At Caviness Wealth Management, we help busy families organize their finances and create a financial plan to help them achieve their goals for the future. To see if we can help your family after you’ve completed this end-of-year financial checklist (or before!), click here to schedule a conversation today.
Content in this material is for general information only and is not intended to provide specific advice or recommendations for any individual.
