It’s December! The season when we celebrate by spending time with family and friends. It’s also the time for financially wrapping up the year (“wrapping” get it? 🙂 ). Time to reflect on the past months and start planning for the coming year.
Here are some things you may want to check off your personal finance list in December
Review Your Old Budget and Create a New Budget for Next Year
During December my first personal finance to-do item is to review how we did with our money last year and create monthly budgets for the coming year.
If you didn’t meet your budget goals, now is a time to reflect on what you can do differently.
I keep my budget on spreadsheets because this helps me easily save copies of my current budget and past budgets. I mostly use 2 spreadsheets:
- I have a spreadsheet that looks like a check book – I use it to track our spend against what we have in the bank.
- And a second spreadsheet where, by month, I list our assets against our debt – I use this to figure out our net worth. I can also easily see how our net worth changes from month to month.
Pull your Credit Report
There are three credit bureaus – Equifax, Experian and Transunion.
With all the identity theft and credit hacking issues, it’s good to do this regularly.
Tip: For year-round monitoring, pull a different credit report every 4 months
Now is a good time to add this to your calendar.
Use Any FSA Dollars
Whether you have a Healthcare FSA or a Dependent Care FSA, these accounts are usually use-it-or-lose-it and many with a cut-off date of December 31st.
Now is the time to check with your employer what your balance is and what the deadline for using the money is.
Make IRA Contributions
Technically, we have until tax day to do this, but it’s good to look at it now.
The limits are $5,500 for anyone under 49 and $6,500 for anyone 50 or older.
You can choose from traditional IRAs (you pay the tax after retirement) or IRA Roths (you pay the taxes now and never worry about them again).
If you worked and paid taxes last year, this is a great option to save for the future in addition to any 401k money.
If you have a stay at home spouse, don’t forget them! They can also save for retirement in an IRA too!
Traditional IRA to IRA Roth Conversions
This confused me a few years ago. I tried to do a conversion from my before-tax IRA to my after-tax Roth IRA in April (contributions can be made up until tax day), only to discover that the deadline for conversions was December 31st. Sighs…
Note that converting from a traditional IRA to a Roth IRA will result in a tax bill, so it’s good to plan ahead if you choose to do this.
Organize Receipts and Expenses
It stinks to ruin the spirit of the season by talking about taxes…but, they’re just around the corner so might as well start prepping.
This is the time to start making sure all business receipts and donation receipts for the year are handy for tax time.
Don’t forget receipts for any donations made as late as December 31st.
I also keep a mileage log for tax time. This is the time to go through my last year’s appointments and make sure all my mileage is accounted for.
Review Your Beneficiaries
If anything changed with the people in your life since you last updated your beneficiaries, now is the time to set aside a few minutes to update your beneficiaries.
Whether new children, marriage, divorce, death in the family…whatever, it’s important to make sure beneficiaries are up to date.
This applies to insurance, investments, savings, wills, etc.
Review Insurance Coverage and Limits
Wrap up year by making sure you’re protected with the right amount of insurance.
Paying down debt, saving and investing are only part of the picture. It’s also important to protect what you’ve been able to build from the unexpected.
This time of year, I like to double check that the coverage on my auto, homeowners and life insurances still meet my family’s needs.
Review Investment Allocations
Unless you’re all in with target date funds, which auto allocate, now is the time to make sure your allocations are where you want them to be for your age, stage of life and when you plan to draw on your investments.
And not just for retirement, don’t forget 529 college savings allocations too!
I’ll be honest, I haven’t done this yet. However, it seems like a brilliant idea and I plan to start this year! There seems to be a major security hack every few minutes and updating passwords seems like an easy way to help protect myself.
If it’s hard to come up with new passwords or you want stronger passwords, here’s a short tutorial on how to create a random password using Excel. Once you create the file, save it and you’ll be able to instantly generate random passwords forever 🙂
After Financially Wrapping Up the Year
Sit back with a glass of egg nog and relax to holiday music. Aaaahhhh.