Financially Wrapping Up the Year

Wrapping up the Year

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? 🙂 ) by reflecting on the last 11 months and start planning for any changes we want for the coming year. In case you’re wondering, here are some things you may want to check off your personal finance list before year end.

Review and Update Budget

I keep my budget on spreadsheets because this helps me save a copy of my current budget and past budgets. I have a spreadsheet that looks like a check book – where I track expenses against what we have in the bank. And a second spreadsheet where, by month, I list the balance of all our assets against our debt – this is how to figure out net worth. This lets me see how our net worth changes from month to month. During December my first personal finance to-do item is to review how the last year went and create monthly estimates for the coming year. Whether you use a spreadsheet or a notebook, I think this is a great exercise for financially wrapping up the year.

Pull a Credit Report

There are three credit bureaus – Equifax, Experian and Transunion. The website makes one report from each bureau available for free every year. For year-round monitoring, I pull a different credit report every 4 months. Whether you choose to do this during December or January, now is the time to add this to your calendar.

Use Any FSA Dollars

Whether it’s a Healthcare FSA or a Dependent Care FSA these accounts are usually use-it-or-lose-it and many with a cut-off of December 31st. Now is the time to double check with your employer what your balance is and what their deadline for using the money is. It’s also a good time to consider how much you may need in FSA money next year.

IRA Contributions

Technically, we have until tax day to do this, but it’s good to plan 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. If you have a stay at home spouse, don’t forget them! They can also save for retirement using a Spousal IRA.

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 actually 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.

Review 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 again. 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 however much you’ve been able to build from the unexpected. This time of year, I like to double check that the coverages 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. Not just for retirement, don’t forget 529 college savings allocations too!

Update Passwords

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 this looks like an easy way to help protect myself.

After Financially Wrapping Up the Year

I’ll be sitting back with a glass of egg nog and relaxing to holiday music. Aaaahhhh.